Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 27, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | Mellanox Technologies, Ltd. | |
Trading Symbol | MLNX | |
Entity Central Index Key | 1,356,104 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 52,186,809 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 90,578 | $ 62,473 |
Short-term investments | 195,726 | 211,281 |
Accounts receivable, net | 142,897 | 154,213 |
Inventories | 69,886 | 64,657 |
Other current assets | 15,553 | 14,295 |
Total current assets | 514,640 | 506,919 |
Property and equipment, net | 110,135 | 109,919 |
Severance assets | 18,012 | 18,302 |
Intangible assets, net | 218,738 | 228,195 |
Goodwill | 472,437 | 472,437 |
Deferred taxes and other long-term assets | 94,404 | 66,162 |
Total assets | 1,428,366 | 1,401,934 |
Current liabilities: | ||
Accounts payable | 64,498 | 59,090 |
Accrued liabilities | 107,661 | 114,058 |
Deferred revenue | 20,216 | 23,485 |
Current portion of term debt | 34,332 | 0 |
Total current liabilities | 226,707 | 196,633 |
Accrued severance | 22,770 | 23,205 |
Deferred revenue | 18,600 | 17,820 |
Term debt | 0 | 72,761 |
Other long-term liabilities | 33,096 | 34,067 |
Total liabilities | 301,173 | 344,486 |
Commitments and Contingencies - (see Note 8) | ||
Shareholders’ equity: | ||
Ordinary shares: NIS 0.0175 par value, 200,000 shares authorized, 52,160 and 51,488 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively | 224 | 221 |
Additional paid-in capital | 903,008 | 873,979 |
Accumulated other comprehensive income (loss) | (13) | 1,618 |
Retained earnings | 223,974 | 181,630 |
Total shareholders’ equity | 1,127,193 | 1,057,448 |
Total liabilities and shareholders' equity | $ 1,428,366 | $ 1,401,934 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - ₪ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Ordinary shares, par value (in NIS per share) | ₪ 0.0175 | ₪ 0.0175 |
Ordinary shares, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Ordinary shares, shares issued (in shares) | 52,160,000 | 51,488,000 |
Ordinary shares, shares outstanding (in shares) | 52,160,000 | 51,488,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Total revenues | $ 251,000 | $ 188,651 |
Cost of revenues | 88,998 | 64,450 |
Gross profit | 162,002 | 124,201 |
Operating expenses: | ||
Research and development | 86,426 | 88,491 |
Sales and marketing | 39,494 | 35,757 |
General and administrative | 16,516 | 12,519 |
Restructuring charges | 7,587 | 0 |
Total operating expenses | 150,023 | 136,767 |
Income (loss) from operations | 11,979 | (12,566) |
Interest expense | (1,171) | (1,993) |
Other income, net | 638 | 683 |
Interest and other, net | (533) | (1,310) |
Income (loss) before taxes on income | 11,446 | (13,876) |
Benefit from taxes on income | (26,397) | (1,632) |
Net income (loss) | $ 37,843 | $ (12,244) |
Net income (loss) per share - basic (in USD per share) | $ 0.73 | $ (0.25) |
Net income (loss) per share - diluted (in USD per share) | $ 0.71 | $ (0.25) |
Shares used in computing net income (loss) per share: | ||
Basic (in shares) | 51,819 | 49,337 |
Diluted (in shares) | 53,646 | 49,337 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ 37,843 | $ (12,244) |
Other comprehensive income (loss), net of tax: | ||
Change in unrealized gains/losses on available-for-sale securities, net of tax | (293) | 69 |
Change in unrealized gains/losses on derivative contracts, net of tax | (1,338) | 4,244 |
Other comprehensive income (loss), net of tax | (1,631) | 4,313 |
Total comprehensive income (loss), net of tax | $ 36,212 | $ (7,931) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 37,843 | $ (12,244) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 26,442 | 25,181 |
Deferred income taxes | (26,827) | (942) |
Share-based compensation | 14,974 | 14,768 |
Gain on investments, net | (886) | (858) |
Loss on disposal of property and equipment | 139 | 0 |
Changes in assets and liabilities: | ||
Accounts receivable | 11,316 | 15,532 |
Inventories | (5,654) | (10,457) |
Prepaid expenses and other assets | (1,349) | (3,693) |
Accounts payable | 3,911 | 4,931 |
Accrued liabilities and other liabilities | (4,504) | 2,783 |
Net cash provided by operating activities | 55,405 | 35,001 |
Cash flows from investing activities: | ||
Purchase of severance-related insurance policies | (317) | (315) |
Purchase of short-term investments | (20,899) | (50,302) |
Proceeds from sales of short-term investments | 8,943 | 54,242 |
Proceeds from maturities of short-term investments | 28,104 | 1,815 |
Purchase of property and equipment | (7,226) | (15,911) |
Purchase of intangible assets | (6,315) | (1,115) |
Purchase of investments in private companies | (2,500) | (11,000) |
Net cash used in investing activities | (210) | (22,586) |
Cash flows from financing activities: | ||
Principal payments on term debt | (39,000) | (20,000) |
Payments on capital lease and intangible asset financings | (2,173) | (2,514) |
Proceeds from issuances of ordinary shares through employee equity incentive plans | 14,058 | 11,676 |
Net cash used in financing activities | (27,115) | (10,838) |
Net increase in cash, cash equivalents, and restricted cash | 28,080 | 1,577 |
Cash, cash equivalents, and restricted cash at beginning of period | 70,498 | 56,780 |
Cash, cash equivalents, and restricted cash at end of period | 98,578 | 58,357 |
Supplemental disclosure of non-cash investing and financing activities | ||
Intangible assets financed with debt | 549 | 3,220 |
Unpaid additions to property and equipment | 2,254 | 1,510 |
Transfer from inventory to property and equipment | $ 425 | $ 633 |
THE COMPANY AND SUMMARY OF SIGN
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Company Mellanox Technologies, Ltd., an Israeli corporation (the "Company" or "Mellanox"), was incorporated and commenced operations in March 1999. Mellanox is a supplier of high-performance interconnect products for computing, storage and communications applications. Principles of presentation The unaudited condensed consolidated financial statements include the Company's accounts as well as those of its wholly owned subsidiaries after the elimination of all intercompany balances and transactions. The unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The year-end balance sheet data were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained in this quarterly report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, for a quarterly report on Form 10-Q and are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 , filed with the SEC on February 16, 2018 . The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2018 or thereafter. Risks and uncertainties The Company is subject to all of the risks inherent in a company which operates in the dynamic and competitive semiconductor industry. Significant changes in any of the following areas could have a material adverse impact on the Company's financial position and results of operations: unpredictable volume or timing of customer orders; ordered product mix; the sales outlook and purchasing patterns of the Company's customers based on consumer demands and general economic conditions; loss of one or more of the Company's customers; decreases in the average selling prices of products or increases in the average cost of finished goods; the availability, pricing and timeliness of delivery of components used in the Company's products; reliance on a limited number of subcontractors to manufacture, assemble, package and production test the Company's products; the Company's ability to successfully develop, introduce and sell new or enhanced products in a timely manner; product obsolescence and the Company's ability to manage product transitions; the timing of announcements or introductions of new products by the Company's competitors; and the Company's ability to successfully integrate acquired businesses. Use of estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, allowances for price adjustments, investment valuation, warranty reserves, inventory reserves, share-based compensation expense, long-term asset valuations, useful lives of property, equipment, and intangibles, accounting for business combinations, goodwill and purchased intangible asset valuation, investments in privately-held companies, accounting and fair value of financial instruments and derivatives, deferred income tax asset valuation, uncertain tax positions, and litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results that the Company experiences may differ materially and adversely from the Company's original estimates. To the extent there are material differences between the estimates and actual results, the Company's future results of operations will be affected. Significant accounting policies Other than the changes discussed below, there have been no changes in the Company’s significant accounting policies that were disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017 , filed with the SEC on February 16, 2018 . On January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers (ASC 606-10) , using the modified retrospective method. Prior to the adoption of ASC 606-10, the Company deferred the recognition of revenue and the cost of revenue from sales to distributors until the distributors reported that they had sold the products to their customers (known as “sell though” revenue recognition). Under ASC 606-10, the Company recognizes revenue on sales to all distributors upon shipment and transfer of control (known as “sell-in” revenue recognition), net of estimated allowances for price adjustments. As a result of this adoption, the Company revised its accounting policy for revenue recognition as detailed below. Revenue Recognition The Company recognizes revenue when (or as) it satisfies performance obligations by transferring promised products or services to its customers in an amount that reflects the consideration the Company expects to receive. The Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer tangible products, extended warranty and post-contract customer support, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to rebates and adjustments to determine the net consideration to which the Company expects to receive. As the Company’s standard payment terms are less than one year, the contracts have no significant financing component. The Company allocates the transaction price to each distinct performance obligation based on their relative standalone selling price. Revenue from tangible products is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment. The revenues from fixed-price support or maintenance contracts, including extended warranty contracts and software post-contract customer support agreements, are recognized ratably over the contract period and the costs associated with these contracts are recognized as incurred. The Company's standard arrangements with its customers typically do not allow for rights of return. The Company maintains inventory, or hub arrangements with certain customers. Pursuant to these arrangements, the Company delivers products to a customer or a designated third party warehouse based upon the customer's projected needs, but does not recognize product revenue unless and until the customer reports it has removed the Company's product from the warehouse to be incorporated into its end products. A portion of the Company’s sales are made to distributors under agreements which contain price protection provisions. Revenue from sales to distributors is recognized upon shipment and transfer of control, net of estimated allowances for price adjustments. Frequently, distributors submit distribution price adjustment (“DPA”) claims to the Company to adjust the distributor’s cost from the standard price to the pre-approved lower price. After the Company verifies the DPA claim, a credit memo is issued to the distributor. The Company records an allowance for these unprocessed DPA claims and for estimated future DPA claims as a reduction of revenue and a reduction of accounts receivable. The allowance is recorded as a reduction to revenue in the same period that the related revenue is recorded and is calculated based on specific authorized DPA claims and an analysis of historical DPA claims, at the distributor level, over a period of time considered adequate to account for current pricing and business trends. Most of the Company’s distributors are entitled to a limited right of return related to stock rotation. Distributors have the right to return a limited amount of product not to exceed a percentage of distributor’s prior quarter's net purchases. However, a simultaneous, compensation order of equal or greater value must be placed by distributor within the same quarter of the return. Therefore, no stock rotation reserves are recorded. Restricted cash The Company maintains certain cash amounts that are restricted as to withdrawal or use over the long-term. The cash is securing bank guarantees primarily issued against long-term tenancy agreements. The long-term restricted cash balance of $8.0 million was reported in other long-term assets on the balance sheet as of March 31, 2018 , and was included in the ending balance of cash, cash equivalents and restricted cash in the statement of cash flows for the year ended March 31, 2018 . There was no restricted cash as of March 31, 2017 . The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows: March 31, 2018 2017 (In thousands) Cash and cash equivalents, as reported on the balance sheets $ 90,578 $ 58,357 Restricted cash in other long-term assets, as reported on the balance sheets 8,000 — Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows $ 98,578 $ 58,357 Concentration of credit risk The following table summarizes the revenues from customers (including original equipment manufacturers) in excess of 10% of the total revenues: Three Months Ended March 31, 2018 2017 Hewlett Packard Enterprise ("HPE") 17 % 13 % Dell Technologies Inc. ("Dell") 10 % 13 % ____________________ The following table summarizes accounts receivable balances in excess of 10% of total accounts receivable: March 31, 2018 December 31, 2017 HPE 20 % 13 % ____________________ Product warranty The following table provides changes in the product warranty accrual for the three months ended March 31, 2018 and 2017 : Three Months Ended March 31, 2018 2017 (in thousands) Balance, beginning of the period $ 889 $ 1,474 New warranties issued during the period 349 436 Reversal of warranty reserves — (356 ) Settlements during the period (301 ) (343 ) Balance, end of the period 937 1,211 Less: long-term portion of product warranty liability (172 ) (162 ) Current portion, end of the period $ 765 $ 1,049 Net income (loss) per share The following table sets forth the computation of basic and diluted net income (loss) per share for the three months ended March 31, 2018 and 2017 : Three Months Ended March 31, 2018 2017 (in thousands, except per share data) Net income (loss) $ 37,843 $ (12,244 ) Basic and diluted shares: Weighted average ordinary shares outstanding 51,819 49,337 Effect of dilutive shares 1,827 — Shares used to compute diluted net income (loss) per share 53,646 49,337 Net income (loss) per share — basic $ 0.73 $ (0.25 ) Net income (loss) per share — diluted $ 0.71 $ (0.25 ) The Company excluded 0.2 million potentially dilutive share options and restricted share units ("RSUs") from the computation of diluted net income per share for the three months ended March 31, 2018 , and 4.6 million outstanding share options and RSUs from the computation of diluted net loss per share for the three months ended March 31, 2017 , respectively, because including them would have had an anti-dilutive effect. Adoption of new accounting principles In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) . The standard replaced the revenue recognition guidance in U.S. GAAP under Topic 605, and was required to be applied retrospectively to each prior period presented, or applied using a modified retrospective method with the cumulative effect recognized in the beginning retained earnings during the period of initial application. Subsequently, the FASB issued several additional ASUs related to ASU No. 2014-09, collectively they are referred to as the “new revenue standards”, which became effective for the Company beginning January 1, 2018. The Company adopted the standard using the modified retrospective method. See Note 2 for details about the impact from adopting the new revenue standard and other required disclosures. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amended various aspects of the recognition, measurement, presentation, and disclosure of financial instruments, and became effective for the Company beginning January 1, 2018. One aspect that may have a material impact on the Company's consolidated financial statements relates to the measurement of its equity investments in privately-held companies whose fair values are not readily determinable. With the election to use the measurement alternative (as opposed to fair value), the Company measures these equity investments at cost, less impairments, adjusted by observable price changes. No gain or loss was recorded in the three months ended March 31, 2018 as a result of remeasuring the Company's equity investments in privately-held companies. Recent accounting pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The standard requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. Early adoption of the standard is allowed. The standard becomes effective for the Company beginning January 1, 2019. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures. |
REVENUE (Notes)
REVENUE (Notes) | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | REVENUE On January 1, 2018 , the Company adopted ASC Topic 606-10 using the modified retrospective method and applied the standard to those contracts which were not completed as of January 1, 2018 . Results for reporting periods beginning after January 1, 2018 are presented under Topic 606-10, while prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605. The Company recognized the cumulative effect of initially adopting Topic 606-10 as an adjustment to the opening balance of retained earnings as of January 1, 2018 . Distributor revenue was recognized using the sell-through method under Topic 605, while such revenue is recognized using the sell-in method under Topic 606-10, which primarily contributed to the adjustment to the opening balance of retained earnings as well as the impact of adoption disclosed in the tables below. The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2018 for the adoption of Topic 606-10 were as follows: December 31, 2017 Adjustments January 1, 2018 (in thousands) Deferred revenue, short term $ 23,485 $ (4,501 ) $ 18,984 Retained earnings $ 181,630 $ 4,501 $ 186,131 In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated balance sheet was as follows: March 31, 2018 As Reported Impact of Adoption Amounts under Topic 605 (in thousands) Condensed Consolidated Balance Sheet Account receivable, net $ 142,897 $ 3,080 $ 145,977 Deferred revenue, short term 20,216 11,800 32,016 Retained earnings $ 223,974 $ (8,720 ) $ 215,254 In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated statement of operations and cash flows was as follows: Three Months Ended March 31, 2018 As Reported Impact of Adoption Amounts under Topic 605 (in thousands, except per share data) Condensed Consolidated Statement of Operations Total revenues $ 251,000 $ (6,819 ) $ 244,181 Cost of revenues 88,998 (2,600 ) 86,398 Net income $ 37,843 $ (4,219 ) $ 33,624 Earnings per share Basic $ 0.73 $ (0.08 ) $ 0.65 Diluted $ 0.71 $ (0.08 ) $ 0.63 Condensed Consolidated Statement of Cash Flows Cash flows from operating activities: Net income $ 37,843 $ (4,219 ) $ 33,624 Accounts receivable 11,316 (3,080 ) 8,236 Accrued liabilities and other liabilities $ (4,504 ) $ 7,299 $ 2,795 Revenues by geographic region are as follows (prior period amounts have not been adjusted under the modified retrospective method): Three Months Ended March 31, 2018 2017 (in thousands) United States $ 96,260 $ 73,248 China 56,213 33,201 Europe 35,996 46,405 Other Americas 27,740 10,890 Other Asia 34,791 24,907 Total revenue $ 251,000 $ 188,651 The following tables represent our total revenues for the three months ended March 31, 2018 and 2017 by product type and interconnect protocol (prior period amounts have not been adjusted under the modified retrospective method): Three Months Ended March 31, 2018 2017 (in thousands) ICs $ 28,587 $ 42,422 Boards 118,051 64,292 Switch systems 55,647 47,146 Cables, accessories and other 48,715 34,791 Total revenue $ 251,000 $ 188,651 Three Months Ended March 31, 2018 2017 (in thousands) InfiniBand: EDR $ 55,946 $ 39,623 FDR 41,748 49,829 QDR/DDR/SDR 5,444 7,533 Total 103,138 96,985 Ethernet 136,948 80,477 Other 10,914 11,189 Total revenue $ 251,000 $ 188,651 The Company recognizes contract liabilities, or deferred revenues, when it receives advance payments from customers before performance obligations primarily related to extended warranty and post-contract customer support have been performed. Advance payments are received at the beginning of the service period and the related deferred revenues are reclassified to revenue ratably over the service period. The balance of deferred revenues approximates the aggregate amount of the transaction price allocated to the unsatisfied performance obligations at the end of reporting period. The Company expects to recognize the long-term portion of deferred revenue over the remaining service period of up to five years. The following table presents the significant changes in the deferred revenue balance during the three months ended March 31, 2018 : (in thousands) Balance, beginning of the period $ 36,804 New performance obligations 8,145 Reclassification to revenue as a result of satisfying performance obligations (6,133 ) Balance, end of the period 38,816 Less: long-term portion of deferred revenue 18,600 Current portion, end of the period $ 20,216 Because all performance obligations in the Company’s contracts with customers, other than extended warranty and post-contract customer support, relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption and is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. |
BALANCE SHEET COMPONENTS
BALANCE SHEET COMPONENTS | 3 Months Ended |
Mar. 31, 2018 | |
Balance Sheet Related Disclosures [Abstract] | |
BALANCE SHEET COMPONENTS | BALANCE SHEET COMPONENTS: March 31, 2018 December 31, 2017 (in thousands) Accounts receivable, net: Accounts receivable, gross $ 143,529 $ 154,845 Less: allowance for doubtful accounts (632 ) (632 ) $ 142,897 $ 154,213 Inventories: Raw materials $ 10,372 $ 12,656 Work-in-process 31,723 22,769 Finished goods 27,791 29,232 $ 69,886 $ 64,657 Other current assets: Prepaid expenses $ 7,782 $ 7,518 Derivative contracts receivable 170 982 VAT receivable 3,701 2,259 Other 3,900 3,536 $ 15,553 $ 14,295 Property and equipment, net: Computer, equipment, and software $ 171,640 $ 164,707 Furniture and fixtures 2,972 3,198 Leasehold improvements 48,102 47,262 222,714 215,167 Less: Accumulated depreciation and amortization (112,579 ) (105,248 ) $ 110,135 $ 109,919 Deferred taxes and other long-term assets: Equity investments in private companies $ 31,755 $ 29,255 Deferred taxes 51,390 24,563 Long-term restricted cash 8,000 8,025 Other assets 3,259 4,319 $ 94,404 $ 66,162 Accrued liabilities: Payroll and related expenses $ 62,163 $ 71,868 Accrued expenses 35,117 31,951 Derivative contracts payable 540 17 Product warranty liability 765 706 Other 9,076 9,516 $ 107,661 $ 114,058 Other long-term liabilities: Income tax payable $ 24,975 $ 24,425 Deferred rent 2,505 2,220 Other 5,616 7,422 $ 33,096 $ 34,067 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS: Fair value hierarchy: The Company measures its cash equivalents and marketable securities at fair value. The Company’s cash equivalents are classified within Level 1. Cash equivalents are valued primarily using quoted market prices utilizing market observable inputs. The Company's investments in debt securities and certificates of deposits are classified within Level 2 as the market inputs to value these instruments consist of market yields, reported trades and broker/dealer quotes. In addition, foreign currency contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. The Level 3 valuation inputs include the Company's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument's valuation. As of March 31, 2018 and December 31, 2017 , the Company did not have any assets or liabilities valued based on Level 3 valuations. Financial Liabilities Measured at Fair Value on a Nonrecurring Basis: As of March 31, 2018 , the remaining principal of $35.0 million on the Company's $280.0 million Term Debt is classified as a Level 2 fair value measurement in the fair value hierarchy. The principal amount of the Term Debt approximates its fair value at March 31, 2018 . Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis: The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2018 : Level 1 Level 2 Total (in thousands) Money market funds $ 599 $ — $ 599 Certificates of deposit — 46,295 46,295 U.S. Government and agency securities — 36,457 36,457 Commercial paper — 25,904 25,904 Corporate bonds — 57,417 57,417 Municipal bonds — 14,494 14,494 Foreign government bonds — 15,159 15,159 599 195,726 196,325 Long-term restricted cash — 8,000 8,000 Derivative contracts — 170 170 Total financial assets $ 599 $ 203,896 $ 204,495 Derivative contracts — 540 540 Total financial liabilities $ — $ 540 $ 540 The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 : Level 1 Level 2 Total (in thousands) Money market funds $ 1,857 $ — $ 1,857 Certificates of deposit — 58,003 58,003 U.S. Government and agency securities — 43,872 43,872 Commercial paper — 27,029 27,029 Corporate bonds — 54,447 54,447 Municipal bonds — 15,169 15,169 Foreign government bonds — 12,761 12,761 1,857 211,281 213,138 Long-term restricted cash — 8,025 8,025 Derivative contracts — 982 982 Total financial assets $ 1,857 $ 220,288 $ 222,145 Derivative contracts — 17 17 Total financial liabilities $ — $ 17 $ 17 There were no transfers between Level 1 and Level 2 securities during the three months ended March 31, 2018 and 2017 . |
INVESTMENTS
INVESTMENTS | 3 Months Ended |
Mar. 31, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
INVESTMENTS | INVESTMENTS: Cash, cash equivalents and short-term investments: The short-term investments are classified as available-for-sale securities. The cash, cash equivalents and short-term investments at March 31, 2018 and December 31, 2017 were as follows: March 31, 2018 Amortized Unrealized Unrealized Estimated (in thousands) Cash $ 89,979 $ — $ — $ 89,979 Money market funds 599 — — 599 Certificates of deposit 46,361 — (66 ) 46,295 U.S. Government and agency securities 36,644 — (187 ) 36,457 Commercial paper 25,992 — (87 ) 25,905 Corporate bonds 57,861 — (445 ) 57,416 Municipal bonds 14,551 — (57 ) 14,494 Foreign government bonds 15,220 — (61 ) 15,159 Total 287,207 — (903 ) 286,304 Less amounts classified as cash and cash equivalents (90,578 ) — — (90,578 ) Short-term investments $ 196,629 $ — $ (903 ) $ 195,726 December 31, 2017 Amortized Unrealized Unrealized Estimated (in thousands) Cash $ 60,616 $ — $ — $ 60,616 Money market funds 1,857 — — 1,857 Certificates of deposit 58,039 — (36 ) 58,003 U.S. Government and agency securities 44,070 — (198 ) 43,872 Commercial paper 27,073 1 (45 ) 27,029 Corporate bonds 54,673 — (226 ) 54,447 Municipal bonds 15,227 — (58 ) 15,169 Foreign government bonds 12,809 — (48 ) 12,761 Total 274,364 1 (611 ) 273,754 Less amounts classified as cash and cash equivalents (62,473 ) — — (62,473 ) Short-term investments $ 211,891 $ 1 $ (611 ) $ 211,281 Interest income and gains on short-term investments, net were $1.0 million and $0.9 million for the three months ended March 31, 2018 and 2017 , respectively. At March 31, 2018 , gross unrealized losses on investments that were in a gross unrealized loss position for greater than 12 months were immaterial. These investments were not deemed to be other-than-temporarily impaired and the gross unrealized losses were recorded in other comprehensive income (loss) ("OCI"). The contractual maturities of short-term investments at March 31, 2018 and December 31, 2017 were as follows: March 31, 2018 December 31, 2017 Amortized Estimated Amortized Estimated (in thousands) Due in less than one year $ 171,097 $ 170,488 $ 148,232 $ 147,921 Due in one to three years 25,532 25,238 63,659 63,360 $ 196,629 $ 195,726 $ 211,891 $ 211,281 Equity investments in privately-held companies: As of March 31, 2018 and December 31, 2017 , the Company held a total of $31.8 million and $29.3 million , respectively, in equity investments in privately-held companies. No gain or loss was recorded during the three months ended March 31, 2018 as a result of remeasuring the Company's equity investments in privately-held companies. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS: There has been no change in the carrying amount of goodwill of $472.4 million during the three months ended March 31, 2018 . The carrying amounts of intangible assets as of March 31, 2018 were as follows: Gross Accumulated Net (in thousands) Licensed technology $ 47,271 $ (19,686 ) $ 27,585 Developed technology 279,543 (133,297 ) 146,246 Customer relationships 69,776 (26,546 ) 43,230 Trade names 5,600 (3,923 ) 1,677 Total intangible assets $ 402,190 $ (183,452 ) $ 218,738 The carrying amounts of intangible assets as of December 31, 2017 were as follows: Gross Accumulated Net (in thousands) Licensed technology $ 40,407 $ (16,478 ) $ 23,929 Developed technology 279,543 (122,414 ) 157,129 Customer relationships 69,776 (24,783 ) 44,993 Trade names 5,600 (3,456 ) 2,144 Total intangible assets $ 395,326 $ (167,131 ) $ 228,195 Amortization expense of intangible assets totaled approximately $16.3 million and $15.0 million for the three months ended March 31, 2018 and 2017 , respectively. The estimated future amortization expense from amortizable intangible assets is as follows: (in thousands) 2018 (remaining nine months) $ 51,849 2019 60,253 2020 49,693 2021 31,630 2022 11,059 Thereafter 14,254 Total $ 218,738 |
DERIVATIVES AND HEDGING ACTIVIT
DERIVATIVES AND HEDGING ACTIVITIES | 3 Months Ended |
Mar. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVES AND HEDGING ACTIVITIES | DERIVATIVES AND HEDGING ACTIVITIES: The Company enters into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks, mainly the exposure to changes in the exchange rate of the New Israeli Shekels ("NIS") against the U.S. dollar that are associated with forecasted cash flows and existing assets and liabilities. The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. Fair Value of Derivative Contracts The fair value of derivative contracts in the unaudited condensed consolidated balance sheets at March 31, 2018 and December 31, 2017 were as follows: Other current assets Accrued liabilities Other current assets Accrued liabilities March 31, 2018 December 31, 2017 (in thousands) Derivatives designated as hedging instruments Currency forward and option contracts $ 170 $ 528 $ 980 $ — Derivatives not designated as hedging instruments Currency forward and option contracts $ — $ 12 $ 2 $ 17 Total derivatives $ 170 $ 540 $ 982 $ 17 The gross notional amounts of derivative contracts were NIS denominated. The notional amounts of outstanding derivative contracts in U.S. dollars at March 31, 2018 and December 31, 2017 were as follows: March 31, 2018 December 31, 2017 (in thousands) Derivatives designated as hedging instruments Currency forward and option contracts $ 64,485 $ 52,380 Derivatives not designated as hedging instruments Currency forward and option contracts $ 39,841 $ 47,015 Effect of Derivatives Designated as Hedging Instruments on Accumulated Other Comprehensive Income The following table represents the unrealized gains (losses) of derivatives designated as hedging instruments, net of tax effects, that were recorded in accumulated other comprehensive income as of March 31, 2018 and December 31, 2017 and their effect on OCI for the three months ended March 31, 2018 : (in thousands) December 31, 2017 $ 925 Amount of loss recognized in OCI (effective portion) (803 ) Amount of gain reclassified from OCI to income (effective portion) (535 ) March 31, 2018 $ (413 ) Effect of Derivative Contracts on the Unaudited Condensed Consolidated Statement of Operations The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the three months ended March 31, 2018 and 2017 was as follows: Derivatives designated as hedging instruments Derivatives not designated as hedging instruments Three Months Ended March 31, Three Months Ended March 31, 2018 2017 2018 2017 (in thousands) Operating income $ 535 $ 1,436 $ — $ — Other income (loss) $ — $ — $ (890 ) $ 2,066 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES: Commitments Leases At March 31, 2018 , future minimum payments under non-cancelable operating leases are as follows: (in thousands) 2018 (remaining nine months) $ 16,328 2019 17,514 2020 14,683 2021 12,880 2022 9,756 Thereafter 60,021 Total minimum lease payments $ 131,182 Purchase commitments At March 31, 2018 , the Company had the following non-cancelable purchase commitments: (in thousands) 2018 (remaining nine months) $ 212,618 2019 11,918 2020 2,005 2021 536 2022 536 Thereafter — $ 227,613 Other Commitments Operating lease On May 3, 2016, the Company entered into a lease agreement for additional office space expected to be built in Yokneam, Israel. The lease term expires 10 years after lease inception with no options to extend the lease term. The Company's occupancy of the additional office space and its obligation under the lease agreement is contingent on the lessor's attainment of stated milestones in the lease agreement. As such, the Company cannot make a reliable estimate as to the timing of cash payments under the lease. At March 31, 2018 , the estimated total future lease obligation is approximately $30.3 million . Over a twelve month period an estimated rental expense is approximately $3.0 million , and if recognized, would increase the Company's operating expenses in its condensed consolidated statement of operations. Royalty-bearing grants The Company is obliged to pay royalties to the Israeli National Authority for Technological Innovation (the "NATI"), formerly known as the Office of the Chief Scientist of Israel's Ministry of Economy and Industry (the "OCS"), for research and development efforts partially funded through grants from the NATI under approved plans in accordance with the Israeli Law for Encouragement of Research, Development and Technological Innovation in Industry, 1984 and the regulations and rules of the NATI (the "R&D Law"). Royalties are payable to the Israeli government at the rate of 4.5% of the revenues of the Company's products incorporating NATI-funded know-how, and up to the amount of the grants received. Total royalty obligation and royalty rates may increase if manufacturing is transferred outside of Israel. The Company's obligation to pay these royalties is contingent on actual sales of the products or connected services, at which time a liability is recorded. In the absence of such sales, the Company cannot make a reliable estimate as to the timing of cash settlement of the royalties. At March 31, 2018 , the Company had a total future contingent royalty obligation of approximately $36.4 million , and if recognized, would increase the Company's cost of revenues in its condensed consolidated statement of operations. In April 2018, the Company entered into a settlement agreement with the NATI, which eliminated this future contingent royalty obligation of the Company. See Note 15 for further details. Unrecognized tax benefits Due to the inherent uncertainty with respect to the timing of future cash outflows associated with the Company's unrecognized tax benefits, it is unable to reliably estimate the timing of cash settlement with the respective taxing authorities. As of March 31, 2018 , the Company's unrecognized tax benefits totaled $46.0 million , out of which an amount of $23.4 million would reduce the Company's income tax expense and effective tax rate, if recognized. Contingencies Legal proceedings The Company is involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of its business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, securities, personal injuries and other matters. The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on the Company’s condensed consolidated financial position or results of operations. The Company records a liability when it believes that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate. Significant judgment is required to determine both the probability and the estimated amount of a loss or potential loss. The Company may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others: (i) if the damages sought are indeterminate; (ii) if proceedings are in the early stages; (iii) if there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) if there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) if there are significant factual issues to be determined or resolved; (vi) if the proceedings involve a large number of parties; (vii) if relevant law is unsettled or novel or untested legal theories are presented; or (viii) if the proceedings are taking place in jurisdictions where the laws are complex or unclear. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any. |
SHARE INCENTIVE PLANS
SHARE INCENTIVE PLANS | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE INCENTIVE PLANS | SHARE INCENTIVE PLANS Stock Option Plans On April 25, 2017, the Company's shareholders approved the Mellanox Technologies, Ltd. Second Amended and Restated Global Share Incentive Plan (2006) (the “Second Restated Plan”), which constitutes a second amendment and restatement of the Mellanox Technologies, Ltd. Global Share Incentive Plan (2006) and its appendices (the “2006 Plan”), as amended and restated by the Mellanox Technologies, Ltd. Amended and Restated Global Share Incentive Plan (2006) as of March 14, 2016 (the “First Restated Plan”). The Second Restated Plan became effective on February 14, 2017. The Second Restated Plan increases the ordinary shares reserved for issuance under the First Restated Plan by 1,640,000 shares to 2,390,000 shares plus any shares subject to issued and outstanding awards under the other equity incentive plans that existed prior to the First Restated Plan that expire, are cancelled or otherwise terminated after the effective date of the First Restated Plan. The Second Restated Plan also extends the term of the First Restated Plan to February 14, 2027. In addition, the Second Restated Plan implements additional amendments to reflect compensation and governance best practices. Share option activity Share option activity under the Company's equity incentive plans in the three months ended March 31, 2018 is set forth below: Options Outstanding Number of Shares Weighted Average Exercise Price Outstanding at December 31, 2017 1,110,061 $ 38.35 Options exercised (113,101 ) $ 23.96 Options canceled (1,560 ) $ 90.96 Outstanding at March 31, 2018 995,400 $ 39.91 The total pretax intrinsic value of options exercised in the three months ended March 31, 2018 and 2017 was $5.0 million and $3.6 million , respectively. This intrinsic value represents the difference between the fair market value of the Company's ordinary shares on the date of exercise and the exercise price of each option. Based on the closing price of the Company's ordinary shares of $72.85 on March 31, 2018 , the total pretax intrinsic value of options outstanding at March 31, 2018 was $37.5 million . The total pretax intrinsic value of options outstanding at December 31, 2017 was $35.5 million . There were 993,393 and 1,107,712 options exercisable at March 31, 2018 and December 31, 2017 , respectively. The total pretax intrinsic value of exercisable options at March 31, 2018 was $37.4 million . The total pretax intrinsic value of exercisable options at December 31, 2017 was $35.4 million . Restricted share unit activity RSU activity under the Company's equity incentive plans in the three months ended March 31, 2018 is set forth below: Restricted Share Units Outstanding Number of Shares Weighted Average Grant Date Fair Value Non-vested restricted share units at December 31, 2017 3,414,705 $ 48.45 Restricted share units granted 87,200 $ 65.62 Restricted share units vested (271,422 ) $ 45.44 Restricted share units canceled (255,488 ) $ 48.86 Non-vested restricted share units at March 31, 2018 2,974,995 $ 49.19 The weighted average fair value of RSUs granted in the three months ended March 31, 2018 and 2017 was $65.62 and $44.83 , respectively. The total intrinsic value of all outstanding RSUs as of March 31, 2018 and December 31, 2017 was $216.7 million and $220.9 million , respectively. Employee Stock Purchase Plan activity There were 288,017 and 269,698 shares purchased under the ESPP for the three months ended March 31, 2018 and 2017 at an average price per share of $39.40 and $37.63 , respectively. Shares reserved for future issuance The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of March 31, 2018 : Number of Share options outstanding 995,400 Restricted share units outstanding 2,974,995 Shares authorized for future issuance 927,634 ESPP shares available for future issuance 3,137,452 Total shares reserved for future issuance as of March 31, 2018 8,035,481 Share-based compensation The Company accounts for share-based compensation expense based on the estimated fair value of the share equity awards as of the grant dates. The following weighted average assumptions were used to value ESPP shares issued pursuant to the Company's share incentive plans for the three months ended March 31, 2018 and 2017 : Three Months Ended March 31, 2018 2017 Dividend yield — % — % Expected volatility 37.2 % 25.3 % Risk free interest rate 1.20 % 0.91 % Expected life, years 0.5 0.5 The following table summarizes the distribution of total share-based compensation expense in the unaudited condensed consolidated statements of operations: Three Months Ended March 31, 2018 2017 (in thousands) Cost of goods sold $ 411 $ 482 Research and development 8,174 8,690 Sales and marketing 3,599 3,338 General and administrative 2,790 2,258 Total share-based compensation expense $ 14,974 $ 14,768 At March 31, 2018 , there was $123.9 million of total unrecognized share-based compensation costs related to non-vested share-based compensation arrangements. The costs are expected to be recognized over a weighted average period of approximately 2.55 years . |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 3 Months Ended |
Mar. 31, 2018 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended March 31, 2018 and 2017 : Unrealized Gains (Losses) on Available-for-Sale Securities Unrealized Gains (Losses) on Derivatives Designated as Hedging Instruments Total (in thousands) Balance at December 31, 2017 $ 693 $ 925 $ 1,618 Other comprehensive income/(loss) before reclassifications, net of taxes (293 ) (803 ) (1,096 ) Realized (gains)/losses reclassified from accumulated other comprehensive income — (535 ) (535 ) Net current-period other comprehensive income/(loss), net of taxes (293 ) (1,338 ) (1,631 ) Balance at March 31, 2018 $ 400 $ (413 ) $ (13 ) Balance at December 31, 2016 $ (236 ) $ (692 ) $ (928 ) Other comprehensive income/(loss) before reclassifications, net of taxes 73 5,680 5,753 Realized (gains)/losses reclassified from accumulated other comprehensive income (4 ) (1,436 ) (1,440 ) Net current-period other comprehensive income/(loss), net of taxes 69 4,244 4,313 Balance at March 31, 2017 $ (167 ) $ 3,552 $ 3,385 The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2018 and 2017 : Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss) Affected Line Item in the Statement of Operations Three Months Ended March 31, 2018 2017 (in thousands) Realized (gains)/losses on derivatives designated as hedging instruments $ (535 ) $ (1,436 ) Cost of revenues and Operating expenses: (26 ) (84 ) Cost of revenues (64 ) (115 ) General and administrative (47 ) (145 ) Sales and marketing (398 ) (1,092 ) Research and development Realized (gains)/losses on available-for-sale securities — (4 ) Other income, net Total reclassifications for the period $ (535 ) $ (1,440 ) Total |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES: As of March 31, 2018 and December 31, 2017 , the Company had gross unrecognized tax benefits of $46.0 million and $45.2 million , respectively. It is the Company’s policy to classify accrued interest and penalties as part of the unrecognized tax benefits and record the expense in the provision for income taxes. The amount of accrued interest and penalties related to unrecognized tax benefits totaled $ 1.8 million at March 31, 2018 and $1.6 million at December 31, 2017 . During the three months ended March 31, 2018 , the Company released $26.7 million of valuation allowance against the deferred tax assets primarily related to net operating losses carryforwards ("NOLs") and tax credit carryforwards related to its U.S. subsidiaries. After the discontinuation of the Company’s 1550nm silicon photonics development activities in the first quarter of fiscal 2018, the U.S. subsidiaries will have sufficient taxable income in the future to utilize the deferred tax assets before they expire. As of March 31, 2018 , the Company's U.S. subsidiaries had federal and state NOLs of approximately $86.1 million and $74.4 million , respectively. The Company also had federal and state research and development tax credit carryforwards of approximately $12.9 million and $4.5 million , respectively. The U.S. NOLs for federal tax purposes will expire from 2024 to 2027, and the U.S. NOLs for state tax purposes will expire from 2018 to 2037. On December 22, 2017, the Tax Cuts and Jobs Acts was enacted into law. The new legislation contains several key tax provisions that will impact the Company. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, a one-time repatriation tax on accumulated foreign earnings, an elimination of U.S. federal income taxes on dividends from foreign subsidiaries, a limitation on the tax deductibility of interest expense, and a change in rules related to uses and limitations of NOLs created in tax years beginning after December 31, 2017. The lower corporate income tax rate required the Company to remeasure its U.S. deferred tax assets and liabilities as of December 31, 2017 as well as reassess the realizability of its deferred tax assets and liabilities. ASC 740 requires the Company to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff has issued SAB 118 which allowed the Company to record provisional amounts during a measurement period. The Company has concluded that a reasonable estimate could be developed for the effects of the tax reform, and recorded a provisional decrease to deferred tax assets of $3.2 million and corresponding decrease to the valuation allowance as of December 31, 2017. However, due to the fundamental changes of the tax law, the accounting complexity, and the expected ongoing guidance and accounting interpretations during the measurement period, the Company considers the accounting for the deferred tax remeasurement and other items to be incomplete. These effects have been included in the consolidated financial statements for the year ended December 31, 2017 as provisional amounts. During the measurement period, the Company might need to reflect adjustments to the provisional amounts upon obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts. No adjustments to the provisional amounts were recorded during the three months ended March 31, 2018 . The measurement period will end when the Company obtains, prepares, and analyzes the information needed in order to complete the accounting requirements under ASC Topic 740 or on December 22, 2018, whichever is earlier. The Company expects to complete its analysis within the measurement period in accordance with SAB 118. As of March 31, 2018 , the 2014 through 2017 tax years are open and may be subject to potential examinations in the United States. The Company has NOLs in the United States from prior tax periods beginning in 2003 which may be subject to examination upon utilization in future tax periods. As of March 31, 2018 , the 2013 through 2017 tax years are open and may be subject to potential examinations in Denmark and Israel. As of March 31, 2018 , the income tax returns of the Company and one of its subsidiaries in Israel are under examination by the Israeli Income Tax Authorities for certain years from 2013 to 2015 . The Company's operations in Israel were granted "Approved Enterprise" status by the Investment Center in the Israeli Ministry of Economy and Industry and "Beneficiary Enterprise" status from the Israeli Income Tax Authority, which makes the Company eligible for tax benefits under the Israeli Law for Encouragement of Capital Investments, 1959 (the "Encouragement Law"). Under the terms of the Beneficiary Enterprise program, income that is attributable to the Company's operations in Yokneam, Israel, is exempt from income tax commencing fiscal year 2011 through 2021 . Income that is attributable to the Company's operations in Tel Aviv, Israel is subject to a reduced income tax rate (generally between 10.0% and the current corporate tax rate, depending on the percentage of foreign investment in the Company) commencing fiscal year 2013 through 2021 . The tax holiday has resulted in a cash tax savings of $4.7 million for the three months ended March 31, 2018, increasing diluted earnings per share by approximately $0.09 in the three months ended March 31, 2018. On June 14, 2017, the Israeli government legislated new regulations regarding the "Preferred Technological Enterprise" regime, under which a company that complies with the terms may be entitled to certain tax benefits. The Company expects that its operation in Israel will comply with the terms of the Preferred Technological Enterprise regime. Therefore, the Company may utilize the tax benefits under this regime after the end of the benefit period of its Approved and Beneficiary Enterprise statuses (i.e. from fiscal year 2022 onwards). Under the new legislation, the majority of the Company’s income from its operations in Yokneam, Israel, will be subject to a corporate rate of 7.5% , while the majority of the income from its operations in Tel-Aviv, Israel, will be subject to a corporate rate of 12.0% . The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, tax regulations and tax holiday benefits in Israel, and the effectiveness of the Company’s tax planning strategies. The Company’s effective tax rates were (230.6)% and 11.8% for the three months ended March 31, 2018 and 2017 , respectively. The difference between the Company’s effective tax rate and the 21.0% federal statutory rate for the three months ended March 31, 2018 resulted primarily from the release of valuation allowance against the deferred tax assets related to U.S. subsidiaries, the tax holiday in Israel and foreign earnings taxed at rates lower than the federal statutory rates, partially offset by the accrual of unrecognized tax benefits, interest and penalties associated with unrecognized tax positions, non-tax-deductible expenses such as share-based compensation and losses generated from subsidiaries without tax benefit. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous, and the Company is required to make many subjective assumptions and judgments regarding its income tax exposures. In addition, interpretations of and guidance surrounding income tax laws and regulations are subject to change over time. Any changes in the Company’s subjective assumptions and judgments could materially affect amounts recognized in its condensed consolidated balance sheets and statements of operations. At March 31, 2018 , the Company maintained a valuation allowance against deferred tax assets of one of its subsidiaries. The Company assesses its ability to recover its deferred tax assets on an ongoing basis. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considers available positive and negative evidence including its recent cumulative losses, its ability to carry-back losses against prior taxable income and its projected financial results. The Company also considers, commensurate with its objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. A valuation allowance may be recorded in the event it is deemed to be more-likely-than-not that the deferred tax asset cannot be realized. Previously established valuation allowances may also be released in the event it is deemed to be more-likely-than-not that the deferred tax asset can be realized. Any release of valuation allowance will be recorded as a tax benefit which will positively impact the Company’s operating results. Management has determined on the basis of the quarterly assessment performed at March 31, 2018 , that these deferred tax assets are not more-likely-than-not to be realized. |
OTHER INCOME, NET
OTHER INCOME, NET | 3 Months Ended |
Mar. 31, 2018 | |
Other Income and Expenses [Abstract] | |
OTHER INCOME, NET | OTHER INCOME, NET: Other income, net is summarized in the following table: Three Months Ended March 31, 2018 2017 (in thousands) Interest income and gains on short-term investments, net $ 967 $ 878 Foreign exchange loss, net (182 ) (162 ) Other (147 ) (33 ) Other income, net $ 638 $ 683 |
TERM DEBT
TERM DEBT | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
TERM DEBT | TERM DEBT: In connection with the Company’s acquisition of EZchip, on February 22, 2016 , the Company and its wholly owned subsidiary, Mellanox Technologies, Inc., entered into a $280.0 million variable interest rate Term Debt note maturing February 21, 2019 . Debt issuance costs of $5.5 million on the Term Debt are being amortized to interest expense at the effective interest rate over the contractual term of the Term Debt. The Term Debt allows for voluntary prepayments at any time and additional term loan borrowings under certain conditions. The following table presents the Term Debt at March 31, 2018 : (in thousands) Term Debt, principal amount $ 35,000 Less unamortized debt issuance costs 668 Term Debt, principal net of unamortized debt issuance costs $ 34,332 Effective interest rate 3.84 % During the three months ended March 31, 2018 the Company paid $39.0 million of principal. At March 31, 2018 , future contractual principal payments on the Company's Term Debt is summarized as follows: (in thousands) 2018 (remainder of year) $ — 2019 35,000 $ 35,000 The Term Debt bears interest through maturity at a variable rate based upon, at the Company’s option, either (a) the LIBOR rate for Eurocurrency borrowing or (b) an Alternate Base Rate (“ABR”), which is the highest of (i) the administrative agent’s prime rate, (ii) one-half of 1.00% in excess of the overnight U.S. Federal Funds rate, and (iii) 1.00% in excess of the one-month LIBOR, plus in each case, an applicable margin. The applicable margin for Eurocurrency loans ranges, based on the applicable total net leverage ratio, from 1.25% to 2.00% per annum and the applicable margin for ABR loans ranges, based on the applicable total net leverage ratio, from 0.25% to 1.00% per annum. The Term Debt contains a number of covenants and restrictions that among other things, and subject to certain agreed upon exceptions, require the Company and its subsidiaries to satisfy certain financial covenants and restricts the ability of the Company and its subsidiaries to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, declare dividends or redeem or repurchase capital stock, prepay, redeem or purchase subordinated debt and amend or otherwise alter debt agreements, in each case, subject to certain agreed upon exceptions. A failure to comply with these covenants could permit the lenders under the Term Debt to declare all amounts borrowed under the Term Debt, together with accrued interest and fees, to be immediately due and payable. At March 31, 2018 , the Company was in compliance with the covenants for the Term Debt. See Note 15 for more details about the subsequent payment of the Term Debt. |
RESTRUCTURING CHARGES
RESTRUCTURING CHARGES | 3 Months Ended |
Mar. 31, 2018 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING CHARGES | RESTRUCTURING CHARGES: In connection with the discontinuation of its 1550nm silicon photonics development activities, the Company initiated a restructuring plan to wind down the business operations related to these activities, which primarily included terminating employees, exiting contracts with vendors, selling assets, and exiting facilities. During the three months ended March 31, 2018 , the Company recorded employee separation and severance costs of $3.4 million . The Company has completed the employee termination activities, and does not expect additional costs related to employee terminations in future periods. During the three months ended March 31, 2018 , the Company recorded contract exit costs with vendors of $3.2 million . The Company expects to record up to $0.5 million of exit costs in the second quarter of 2018. During the three months ended March 31, 2018 , the Company recorded a loss on disposal of assets of $1.0 million . The Company expects to record up to $0.5 million of losses on the disposal of assets in the second quarter of 2018. As of March 31, 2018 , the Company is still using the facilities related to the discontinued activities and therefore has not recorded any related restructuring charges. The Company expects to record up to $0.5 million of facility related charges in the second quarter of 2018. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS: In April 2018, the Company entered into a settlement agreement with the NATI. As part of the settlement, the Company agreed to pay approximately $9.3 million to eliminate its future contingent royalty obligation of $36.4 million to the NATI, which primarily related to products that the Company is no longer developing. The settlement costs will be included in the statement of operations in the second quarter of 2018. On April 30, 2018, the Company paid off all outstanding principal and interest related to the Term Debt. |
THE COMPANY AND SUMMARY OF SI22
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of presentation | Principles of presentation The unaudited condensed consolidated financial statements include the Company's accounts as well as those of its wholly owned subsidiaries after the elimination of all intercompany balances and transactions. The unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The year-end balance sheet data were derived from audited consolidated financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained in this quarterly report comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, for a quarterly report on Form 10-Q and are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 , filed with the SEC on February 16, 2018 . The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2018 or thereafter. |
Risks and uncertainties | Risks and uncertainties The Company is subject to all of the risks inherent in a company which operates in the dynamic and competitive semiconductor industry. Significant changes in any of the following areas could have a material adverse impact on the Company's financial position and results of operations: unpredictable volume or timing of customer orders; ordered product mix; the sales outlook and purchasing patterns of the Company's customers based on consumer demands and general economic conditions; loss of one or more of the Company's customers; decreases in the average selling prices of products or increases in the average cost of finished goods; the availability, pricing and timeliness of delivery of components used in the Company's products; reliance on a limited number of subcontractors to manufacture, assemble, package and production test the Company's products; the Company's ability to successfully develop, introduce and sell new or enhanced products in a timely manner; product obsolescence and the Company's ability to manage product transitions; the timing of announcements or introductions of new products by the Company's competitors; and the Company's ability to successfully integrate acquired businesses. |
Use of estimates | Use of estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, allowances for doubtful accounts, allowances for price adjustments, investment valuation, warranty reserves, inventory reserves, share-based compensation expense, long-term asset valuations, useful lives of property, equipment, and intangibles, accounting for business combinations, goodwill and purchased intangible asset valuation, investments in privately-held companies, accounting and fair value of financial instruments and derivatives, deferred income tax asset valuation, uncertain tax positions, and litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results that the Company experiences may differ materially and adversely from the Company's original estimates. To the extent there are material differences between the estimates and actual results, the Company's future results of operations will be affected. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when (or as) it satisfies performance obligations by transferring promised products or services to its customers in an amount that reflects the consideration the Company expects to receive. The Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer tangible products, extended warranty and post-contract customer support, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to rebates and adjustments to determine the net consideration to which the Company expects to receive. As the Company’s standard payment terms are less than one year, the contracts have no significant financing component. The Company allocates the transaction price to each distinct performance obligation based on their relative standalone selling price. Revenue from tangible products is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment. The revenues from fixed-price support or maintenance contracts, including extended warranty contracts and software post-contract customer support agreements, are recognized ratably over the contract period and the costs associated with these contracts are recognized as incurred. The Company's standard arrangements with its customers typically do not allow for rights of return. The Company maintains inventory, or hub arrangements with certain customers. Pursuant to these arrangements, the Company delivers products to a customer or a designated third party warehouse based upon the customer's projected needs, but does not recognize product revenue unless and until the customer reports it has removed the Company's product from the warehouse to be incorporated into its end products. A portion of the Company’s sales are made to distributors under agreements which contain price protection provisions. Revenue from sales to distributors is recognized upon shipment and transfer of control, net of estimated allowances for price adjustments. Frequently, distributors submit distribution price adjustment (“DPA”) claims to the Company to adjust the distributor’s cost from the standard price to the pre-approved lower price. After the Company verifies the DPA claim, a credit memo is issued to the distributor. The Company records an allowance for these unprocessed DPA claims and for estimated future DPA claims as a reduction of revenue and a reduction of accounts receivable. The allowance is recorded as a reduction to revenue in the same period that the related revenue is recorded and is calculated based on specific authorized DPA claims and an analysis of historical DPA claims, at the distributor level, over a period of time considered adequate to account for current pricing and business trends. Most of the Company’s distributors are entitled to a limited right of return related to stock rotation. Distributors have the right to return a limited amount of product not to exceed a percentage of distributor’s prior quarter's net purchases. However, a simultaneous, compensation order of equal or greater value must be placed by distributor within the same quarter of the return. Therefore, no stock rotation reserves are recorded. |
Restricted cash | Restricted cash The Company maintains certain cash amounts that are restricted as to withdrawal or use over the long-term. The cash is securing bank guarantees primarily issued against long-term tenancy agreements. |
Recent accounting pronouncements | Adoption of new accounting principles In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) . The standard replaced the revenue recognition guidance in U.S. GAAP under Topic 605, and was required to be applied retrospectively to each prior period presented, or applied using a modified retrospective method with the cumulative effect recognized in the beginning retained earnings during the period of initial application. Subsequently, the FASB issued several additional ASUs related to ASU No. 2014-09, collectively they are referred to as the “new revenue standards”, which became effective for the Company beginning January 1, 2018. The Company adopted the standard using the modified retrospective method. See Note 2 for details about the impact from adopting the new revenue standard and other required disclosures. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 amended various aspects of the recognition, measurement, presentation, and disclosure of financial instruments, and became effective for the Company beginning January 1, 2018. One aspect that may have a material impact on the Company's consolidated financial statements relates to the measurement of its equity investments in privately-held companies whose fair values are not readily determinable. With the election to use the measurement alternative (as opposed to fair value), the Company measures these equity investments at cost, less impairments, adjusted by observable price changes. No gain or loss was recorded in the three months ended March 31, 2018 as a result of remeasuring the Company's equity investments in privately-held companies. Recent accounting pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The standard requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. Early adoption of the standard is allowed. The standard becomes effective for the Company beginning January 1, 2019. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures. |
THE COMPANY AND SUMMARY OF SI23
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of cash and cash equivalents | The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows: March 31, 2018 2017 (In thousands) Cash and cash equivalents, as reported on the balance sheets $ 90,578 $ 58,357 Restricted cash in other long-term assets, as reported on the balance sheets 8,000 — Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows $ 98,578 $ 58,357 |
Reconciliation of cash and cash equivalents to cash, cash equivalents and restricted cash | The following table provides a reconciliation of the cash and cash equivalents balances reported on the balance sheets and the cash, cash equivalents and restricted cash balances reported in the statements of cash flows: March 31, 2018 2017 (In thousands) Cash and cash equivalents, as reported on the balance sheets $ 90,578 $ 58,357 Restricted cash in other long-term assets, as reported on the balance sheets 8,000 — Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows $ 98,578 $ 58,357 |
Schedule of revenues and accounts receivable from customers | The following table summarizes the revenues from customers (including original equipment manufacturers) in excess of 10% of the total revenues: Three Months Ended March 31, 2018 2017 Hewlett Packard Enterprise ("HPE") 17 % 13 % Dell Technologies Inc. ("Dell") 10 % 13 % ____________________ The following table summarizes accounts receivable balances in excess of 10% of total accounts receivable: March 31, 2018 December 31, 2017 HPE 20 % 13 % ____________________ |
Schedule of changes in the entity's liability for product warranty | The following table provides changes in the product warranty accrual for the three months ended March 31, 2018 and 2017 : Three Months Ended March 31, 2018 2017 (in thousands) Balance, beginning of the period $ 889 $ 1,474 New warranties issued during the period 349 436 Reversal of warranty reserves — (356 ) Settlements during the period (301 ) (343 ) Balance, end of the period 937 1,211 Less: long-term portion of product warranty liability (172 ) (162 ) Current portion, end of the period $ 765 $ 1,049 |
Schedule of computation of basic and diluted net income per share | The following table sets forth the computation of basic and diluted net income (loss) per share for the three months ended March 31, 2018 and 2017 : Three Months Ended March 31, 2018 2017 (in thousands, except per share data) Net income (loss) $ 37,843 $ (12,244 ) Basic and diluted shares: Weighted average ordinary shares outstanding 51,819 49,337 Effect of dilutive shares 1,827 — Shares used to compute diluted net income (loss) per share 53,646 49,337 Net income (loss) per share — basic $ 0.73 $ (0.25 ) Net income (loss) per share — diluted $ 0.71 $ (0.25 ) |
REVENUE REVENUE (Tables)
REVENUE REVENUE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The cumulative effect of the changes made to the consolidated balance sheet as of January 1, 2018 for the adoption of Topic 606-10 were as follows: December 31, 2017 Adjustments January 1, 2018 (in thousands) Deferred revenue, short term $ 23,485 $ (4,501 ) $ 18,984 Retained earnings $ 181,630 $ 4,501 $ 186,131 In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated balance sheet was as follows: March 31, 2018 As Reported Impact of Adoption Amounts under Topic 605 (in thousands) Condensed Consolidated Balance Sheet Account receivable, net $ 142,897 $ 3,080 $ 145,977 Deferred revenue, short term 20,216 11,800 32,016 Retained earnings $ 223,974 $ (8,720 ) $ 215,254 In accordance with Topic 606-10, the disclosure of the impact of adoption on the consolidated statement of operations and cash flows was as follows: Three Months Ended March 31, 2018 As Reported Impact of Adoption Amounts under Topic 605 (in thousands, except per share data) Condensed Consolidated Statement of Operations Total revenues $ 251,000 $ (6,819 ) $ 244,181 Cost of revenues 88,998 (2,600 ) 86,398 Net income $ 37,843 $ (4,219 ) $ 33,624 Earnings per share Basic $ 0.73 $ (0.08 ) $ 0.65 Diluted $ 0.71 $ (0.08 ) $ 0.63 Condensed Consolidated Statement of Cash Flows Cash flows from operating activities: Net income $ 37,843 $ (4,219 ) $ 33,624 Accounts receivable 11,316 (3,080 ) 8,236 Accrued liabilities and other liabilities $ (4,504 ) $ 7,299 $ 2,795 |
Disaggregation of Revenue | Revenues by geographic region are as follows (prior period amounts have not been adjusted under the modified retrospective method): Three Months Ended March 31, 2018 2017 (in thousands) United States $ 96,260 $ 73,248 China 56,213 33,201 Europe 35,996 46,405 Other Americas 27,740 10,890 Other Asia 34,791 24,907 Total revenue $ 251,000 $ 188,651 The following tables represent our total revenues for the three months ended March 31, 2018 and 2017 by product type and interconnect protocol (prior period amounts have not been adjusted under the modified retrospective method): Three Months Ended March 31, 2018 2017 (in thousands) ICs $ 28,587 $ 42,422 Boards 118,051 64,292 Switch systems 55,647 47,146 Cables, accessories and other 48,715 34,791 Total revenue $ 251,000 $ 188,651 Three Months Ended March 31, 2018 2017 (in thousands) InfiniBand: EDR $ 55,946 $ 39,623 FDR 41,748 49,829 QDR/DDR/SDR 5,444 7,533 Total 103,138 96,985 Ethernet 136,948 80,477 Other 10,914 11,189 Total revenue $ 251,000 $ 188,651 |
Changes in Deferred Revenue Balances | The following table presents the significant changes in the deferred revenue balance during the three months ended March 31, 2018 : (in thousands) Balance, beginning of the period $ 36,804 New performance obligations 8,145 Reclassification to revenue as a result of satisfying performance obligations (6,133 ) Balance, end of the period 38,816 Less: long-term portion of deferred revenue 18,600 Current portion, end of the period $ 20,216 |
BALANCE SHEET COMPONENTS BALANC
BALANCE SHEET COMPONENTS BALANCE SHEET COMPONENTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Balance Sheet Related Disclosures [Abstract] | |
Schedule of balance sheet components | March 31, 2018 December 31, 2017 (in thousands) Accounts receivable, net: Accounts receivable, gross $ 143,529 $ 154,845 Less: allowance for doubtful accounts (632 ) (632 ) $ 142,897 $ 154,213 Inventories: Raw materials $ 10,372 $ 12,656 Work-in-process 31,723 22,769 Finished goods 27,791 29,232 $ 69,886 $ 64,657 Other current assets: Prepaid expenses $ 7,782 $ 7,518 Derivative contracts receivable 170 982 VAT receivable 3,701 2,259 Other 3,900 3,536 $ 15,553 $ 14,295 Property and equipment, net: Computer, equipment, and software $ 171,640 $ 164,707 Furniture and fixtures 2,972 3,198 Leasehold improvements 48,102 47,262 222,714 215,167 Less: Accumulated depreciation and amortization (112,579 ) (105,248 ) $ 110,135 $ 109,919 Deferred taxes and other long-term assets: Equity investments in private companies $ 31,755 $ 29,255 Deferred taxes 51,390 24,563 Long-term restricted cash 8,000 8,025 Other assets 3,259 4,319 $ 94,404 $ 66,162 Accrued liabilities: Payroll and related expenses $ 62,163 $ 71,868 Accrued expenses 35,117 31,951 Derivative contracts payable 540 17 Product warranty liability 765 706 Other 9,076 9,516 $ 107,661 $ 114,058 Other long-term liabilities: Income tax payable $ 24,975 $ 24,425 Deferred rent 2,505 2,220 Other 5,616 7,422 $ 33,096 $ 34,067 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of the fair value hierarchy of the Company's financial assets and liabilities measured at fair value | The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2018 : Level 1 Level 2 Total (in thousands) Money market funds $ 599 $ — $ 599 Certificates of deposit — 46,295 46,295 U.S. Government and agency securities — 36,457 36,457 Commercial paper — 25,904 25,904 Corporate bonds — 57,417 57,417 Municipal bonds — 14,494 14,494 Foreign government bonds — 15,159 15,159 599 195,726 196,325 Long-term restricted cash — 8,000 8,000 Derivative contracts — 170 170 Total financial assets $ 599 $ 203,896 $ 204,495 Derivative contracts — 540 540 Total financial liabilities $ — $ 540 $ 540 The following table represents the fair value hierarchy of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 : Level 1 Level 2 Total (in thousands) Money market funds $ 1,857 $ — $ 1,857 Certificates of deposit — 58,003 58,003 U.S. Government and agency securities — 43,872 43,872 Commercial paper — 27,029 27,029 Corporate bonds — 54,447 54,447 Municipal bonds — 15,169 15,169 Foreign government bonds — 12,761 12,761 1,857 211,281 213,138 Long-term restricted cash — 8,025 8,025 Derivative contracts — 982 982 Total financial assets $ 1,857 $ 220,288 $ 222,145 Derivative contracts — 17 17 Total financial liabilities $ — $ 17 $ 17 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of cash, cash equivalents and short-term investments | The short-term investments are classified as available-for-sale securities. The cash, cash equivalents and short-term investments at March 31, 2018 and December 31, 2017 were as follows: March 31, 2018 Amortized Unrealized Unrealized Estimated (in thousands) Cash $ 89,979 $ — $ — $ 89,979 Money market funds 599 — — 599 Certificates of deposit 46,361 — (66 ) 46,295 U.S. Government and agency securities 36,644 — (187 ) 36,457 Commercial paper 25,992 — (87 ) 25,905 Corporate bonds 57,861 — (445 ) 57,416 Municipal bonds 14,551 — (57 ) 14,494 Foreign government bonds 15,220 — (61 ) 15,159 Total 287,207 — (903 ) 286,304 Less amounts classified as cash and cash equivalents (90,578 ) — — (90,578 ) Short-term investments $ 196,629 $ — $ (903 ) $ 195,726 December 31, 2017 Amortized Unrealized Unrealized Estimated (in thousands) Cash $ 60,616 $ — $ — $ 60,616 Money market funds 1,857 — — 1,857 Certificates of deposit 58,039 — (36 ) 58,003 U.S. Government and agency securities 44,070 — (198 ) 43,872 Commercial paper 27,073 1 (45 ) 27,029 Corporate bonds 54,673 — (226 ) 54,447 Municipal bonds 15,227 — (58 ) 15,169 Foreign government bonds 12,809 — (48 ) 12,761 Total 274,364 1 (611 ) 273,754 Less amounts classified as cash and cash equivalents (62,473 ) — — (62,473 ) Short-term investments $ 211,891 $ 1 $ (611 ) $ 211,281 |
Schedule of contractual maturities of short-term investments | The contractual maturities of short-term investments at March 31, 2018 and December 31, 2017 were as follows: March 31, 2018 December 31, 2017 Amortized Estimated Amortized Estimated (in thousands) Due in less than one year $ 171,097 $ 170,488 $ 148,232 $ 147,921 Due in one to three years 25,532 25,238 63,659 63,360 $ 196,629 $ 195,726 $ 211,891 $ 211,281 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of carrying amounts of intangible assets | The carrying amounts of intangible assets as of March 31, 2018 were as follows: Gross Accumulated Net (in thousands) Licensed technology $ 47,271 $ (19,686 ) $ 27,585 Developed technology 279,543 (133,297 ) 146,246 Customer relationships 69,776 (26,546 ) 43,230 Trade names 5,600 (3,923 ) 1,677 Total intangible assets $ 402,190 $ (183,452 ) $ 218,738 The carrying amounts of intangible assets as of December 31, 2017 were as follows: Gross Accumulated Net (in thousands) Licensed technology $ 40,407 $ (16,478 ) $ 23,929 Developed technology 279,543 (122,414 ) 157,129 Customer relationships 69,776 (24,783 ) 44,993 Trade names 5,600 (3,456 ) 2,144 Total intangible assets $ 395,326 $ (167,131 ) $ 228,195 |
Schedule of estimated future amortization expense from amortizable intangible assets | The estimated future amortization expense from amortizable intangible assets is as follows: (in thousands) 2018 (remaining nine months) $ 51,849 2019 60,253 2020 49,693 2021 31,630 2022 11,059 Thereafter 14,254 Total $ 218,738 |
DERIVATIVES AND HEDGING ACTIV29
DERIVATIVES AND HEDGING ACTIVITIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of fair value of derivative contracts | The fair value of derivative contracts in the unaudited condensed consolidated balance sheets at March 31, 2018 and December 31, 2017 were as follows: Other current assets Accrued liabilities Other current assets Accrued liabilities March 31, 2018 December 31, 2017 (in thousands) Derivatives designated as hedging instruments Currency forward and option contracts $ 170 $ 528 $ 980 $ — Derivatives not designated as hedging instruments Currency forward and option contracts $ — $ 12 $ 2 $ 17 Total derivatives $ 170 $ 540 $ 982 $ 17 |
Schedule of notional amounts of outstanding derivative positions | The notional amounts of outstanding derivative contracts in U.S. dollars at March 31, 2018 and December 31, 2017 were as follows: March 31, 2018 December 31, 2017 (in thousands) Derivatives designated as hedging instruments Currency forward and option contracts $ 64,485 $ 52,380 Derivatives not designated as hedging instruments Currency forward and option contracts $ 39,841 $ 47,015 |
Schedule of designated derivative contracts as cash flow hedges and their impact on OCI | The following table represents the unrealized gains (losses) of derivatives designated as hedging instruments, net of tax effects, that were recorded in accumulated other comprehensive income as of March 31, 2018 and December 31, 2017 and their effect on OCI for the three months ended March 31, 2018 : (in thousands) December 31, 2017 $ 925 Amount of loss recognized in OCI (effective portion) (803 ) Amount of gain reclassified from OCI to income (effective portion) (535 ) March 31, 2018 $ (413 ) |
Effect of derivative contracts on the condensed consolidated statement of operations | The effect of derivative contracts on the unaudited condensed consolidated statements of operations for the three months ended March 31, 2018 and 2017 was as follows: Derivatives designated as hedging instruments Derivatives not designated as hedging instruments Three Months Ended March 31, Three Months Ended March 31, 2018 2017 2018 2017 (in thousands) Operating income $ 535 $ 1,436 $ — $ — Other income (loss) $ — $ — $ (890 ) $ 2,066 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum payments under non-cancelable operating and capital leases | At March 31, 2018 , future minimum payments under non-cancelable operating leases are as follows: (in thousands) 2018 (remaining nine months) $ 16,328 2019 17,514 2020 14,683 2021 12,880 2022 9,756 Thereafter 60,021 Total minimum lease payments $ 131,182 |
Purchase commitment, excluding long-term commitment | At March 31, 2018 , the Company had the following non-cancelable purchase commitments: (in thousands) 2018 (remaining nine months) $ 212,618 2019 11,918 2020 2,005 2021 536 2022 536 Thereafter — $ 227,613 |
SHARE INCENTIVE PLANS (Tables)
SHARE INCENTIVE PLANS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of share option awards activity under equity incentive plans | Share option activity under the Company's equity incentive plans in the three months ended March 31, 2018 is set forth below: Options Outstanding Number of Shares Weighted Average Exercise Price Outstanding at December 31, 2017 1,110,061 $ 38.35 Options exercised (113,101 ) $ 23.96 Options canceled (1,560 ) $ 90.96 Outstanding at March 31, 2018 995,400 $ 39.91 |
Summary of restricted share units activity | RSU activity under the Company's equity incentive plans in the three months ended March 31, 2018 is set forth below: Restricted Share Units Outstanding Number of Shares Weighted Average Grant Date Fair Value Non-vested restricted share units at December 31, 2017 3,414,705 $ 48.45 Restricted share units granted 87,200 $ 65.62 Restricted share units vested (271,422 ) $ 45.44 Restricted share units canceled (255,488 ) $ 48.86 Non-vested restricted share units at March 31, 2018 2,974,995 $ 49.19 |
Summary of ordinary shares reserved for future issuance under equity incentive plans | The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of March 31, 2018 : Number of Share options outstanding 995,400 Restricted share units outstanding 2,974,995 Shares authorized for future issuance 927,634 ESPP shares available for future issuance 3,137,452 Total shares reserved for future issuance as of March 31, 2018 8,035,481 |
Schedule of weighted average assumptions used to value share options granted | The following weighted average assumptions were used to value ESPP shares issued pursuant to the Company's share incentive plans for the three months ended March 31, 2018 and 2017 : Three Months Ended March 31, 2018 2017 Dividend yield — % — % Expected volatility 37.2 % 25.3 % Risk free interest rate 1.20 % 0.91 % Expected life, years 0.5 0.5 |
Summary of the distribution of total share-based compensation expense | The following table summarizes the distribution of total share-based compensation expense in the unaudited condensed consolidated statements of operations: Three Months Ended March 31, 2018 2017 (in thousands) Cost of goods sold $ 411 $ 482 Research and development 8,174 8,690 Sales and marketing 3,599 3,338 General and administrative 2,790 2,258 Total share-based compensation expense $ 14,974 $ 14,768 |
ACCUMULATED OTHER COMPREHENSI32
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
Summary of the changes in accumulated balances of other comprehensive income (loss) | The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended March 31, 2018 and 2017 : Unrealized Gains (Losses) on Available-for-Sale Securities Unrealized Gains (Losses) on Derivatives Designated as Hedging Instruments Total (in thousands) Balance at December 31, 2017 $ 693 $ 925 $ 1,618 Other comprehensive income/(loss) before reclassifications, net of taxes (293 ) (803 ) (1,096 ) Realized (gains)/losses reclassified from accumulated other comprehensive income — (535 ) (535 ) Net current-period other comprehensive income/(loss), net of taxes (293 ) (1,338 ) (1,631 ) Balance at March 31, 2018 $ 400 $ (413 ) $ (13 ) Balance at December 31, 2016 $ (236 ) $ (692 ) $ (928 ) Other comprehensive income/(loss) before reclassifications, net of taxes 73 5,680 5,753 Realized (gains)/losses reclassified from accumulated other comprehensive income (4 ) (1,436 ) (1,440 ) Net current-period other comprehensive income/(loss), net of taxes 69 4,244 4,313 Balance at March 31, 2017 $ (167 ) $ 3,552 $ 3,385 |
Reclassification out of accumulated other comprehensive income | The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2018 and 2017 : Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss) Affected Line Item in the Statement of Operations Three Months Ended March 31, 2018 2017 (in thousands) Realized (gains)/losses on derivatives designated as hedging instruments $ (535 ) $ (1,436 ) Cost of revenues and Operating expenses: (26 ) (84 ) Cost of revenues (64 ) (115 ) General and administrative (47 ) (145 ) Sales and marketing (398 ) (1,092 ) Research and development Realized (gains)/losses on available-for-sale securities — (4 ) Other income, net Total reclassifications for the period $ (535 ) $ (1,440 ) Total |
OTHER INCOME, NET (Tables)
OTHER INCOME, NET (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Other Income and Expenses [Abstract] | |
Schedule of other income, net | Other income, net is summarized in the following table: Three Months Ended March 31, 2018 2017 (in thousands) Interest income and gains on short-term investments, net $ 967 $ 878 Foreign exchange loss, net (182 ) (162 ) Other (147 ) (33 ) Other income, net $ 638 $ 683 |
TERM DEBT (Tables)
TERM DEBT (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of debt | The following table presents the Term Debt at March 31, 2018 : (in thousands) Term Debt, principal amount $ 35,000 Less unamortized debt issuance costs 668 Term Debt, principal net of unamortized debt issuance costs $ 34,332 Effective interest rate 3.84 % |
Contractual obligation, fiscal year maturity schedule | At March 31, 2018 , future contractual principal payments on the Company's Term Debt is summarized as follows: (in thousands) 2018 (remainder of year) $ — 2019 35,000 $ 35,000 |
THE COMPANY AND SUMMARY OF SI35
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Restricted cash narrative) (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Long-term restricted cash | $ 8,000,000 | $ 8,025,000 | $ 0 |
THE COMPANY AND SUMMARY OF SI36
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Restricted cash) (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Cash and cash equivalents, as reported on the balance sheets | $ 90,578,000 | $ 62,473,000 | $ 58,357,000 | |
Restricted cash in other long-term assets, as reported on the balance sheets | 8,000,000 | 8,025,000 | 0 | |
Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows | $ 98,578,000 | $ 70,498,000 | $ 58,357,000 | $ 56,780,000 |
THE COMPANY AND SUMMARY OF SI37
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Concentration of credit risk) (Details) - Customer Concentration Risk | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Hewlett Packard Enterprise (HPE) | Net sales revenue | |||
Concentration Risk [Line Items] | |||
Percentage of consolidated revenue by major customer | 17.00% | 13.00% | |
Hewlett Packard Enterprise (HPE) | Accounts receivable | |||
Concentration Risk [Line Items] | |||
Percentage of consolidated revenue by major customer | 20.00% | 13.00% | |
Dell Technologies | Net sales revenue | |||
Concentration Risk [Line Items] | |||
Percentage of consolidated revenue by major customer | 10.00% | 13.00% |
THE COMPANY AND SUMMARY OF SI38
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Product warranty) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Changes in the entity's liability for product warranty | |||
Balance, beginning of the period | $ 889 | $ 1,474 | |
New warranties issued during the period | 349 | 436 | |
Reversal of warranty reserves | 0 | (356) | |
Settlements during the period | (301) | (343) | |
Balance, end of the period | 937 | 1,211 | |
Less: long-term portion of product warranty liability | (172) | (162) | |
Current portion, end of the period | $ 765 | $ 1,049 | $ 706 |
THE COMPANY AND SUMMARY OF SI39
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Net income (loss) per share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net income (loss) | $ 37,843 | $ (12,244) |
Basic and diluted shares: | ||
Weighted average ordinary shares outstanding (in shares) | 51,819 | 49,337 |
Effect of dilutive shares (in shares) | $ 1,827 | $ 0 |
Shares used to compute diluted net income (loss) per share (in shares) | 53,646 | 49,337 |
Net income (loss) per share - basic (in USD per share) | $ 0.73 | $ (0.25) |
Net income (loss) per share - diluted (in USD per share) | $ 0.71 | $ (0.25) |
Share options and restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share | 200 | 4,600 |
REVENUE REVENUE (Cumulative eff
REVENUE REVENUE (Cumulative effect of changes for Topic 606 made to balance sheet) (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Deferred revenue, short term | $ 20,216 | $ 18,984 | $ 23,485 |
Retained earnings | 223,974 | 186,131 | 181,630 |
Calculated under Revenue Guidance in Effect before Topic 606 | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Deferred revenue, short term | 32,016 | 23,485 | |
Retained earnings | 215,254 | $ 181,630 | |
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09 | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Deferred revenue, short term | 11,800 | (4,501) | |
Retained earnings | $ (8,720) | $ 4,501 |
REVENUE REVENUE (Impact to bala
REVENUE REVENUE (Impact to balance sheet) (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Accounts receivable, net | $ 142,897 | $ 154,213 | |
Deferred revenue, short term | 20,216 | $ 18,984 | 23,485 |
Retained earnings | 223,974 | 186,131 | 181,630 |
Calculated under Revenue Guidance in Effect before Topic 606 | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Accounts receivable, net | 145,977 | ||
Deferred revenue, short term | 32,016 | 23,485 | |
Retained earnings | 215,254 | $ 181,630 | |
Accounting Standards Update 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606 | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Accounts receivable, net | 3,080 | ||
Deferred revenue, short term | 11,800 | (4,501) | |
Retained earnings | $ (8,720) | $ 4,501 |
REVENUE REVENUE (Impact to stat
REVENUE REVENUE (Impact to statement of operations and cash flow) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Condensed Consolidated Statement of Operations [Abstract] | ||
Total revenues | $ 251,000 | $ 188,651 |
Cost of revenues | 88,998 | 64,450 |
Net income | $ 37,843 | $ (12,244) |
Earnings Per Share [Abstract] | ||
Basic (in USD per share) | $ 0.73 | $ (0.25) |
Diluted (in USD per share) | $ 0.71 | $ (0.25) |
Cash flows from operating activities: | ||
Accounts receivable | $ 11,316 | $ 15,532 |
Accrued liabilities and other liabilities | (4,504) | $ 2,783 |
Calculated under Revenue Guidance in Effect before Topic 606 | ||
Condensed Consolidated Statement of Operations [Abstract] | ||
Total revenues | 244,181 | |
Cost of revenues | 86,398 | |
Net income | $ 33,624 | |
Earnings Per Share [Abstract] | ||
Basic (in USD per share) | $ 0.65 | |
Diluted (in USD per share) | $ 0.63 | |
Cash flows from operating activities: | ||
Accounts receivable | $ 8,236 | |
Accrued liabilities and other liabilities | 2,795 | |
Accounting Standards Update 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606 | ||
Condensed Consolidated Statement of Operations [Abstract] | ||
Total revenues | (6,819) | |
Cost of revenues | (2,600) | |
Net income | $ (4,219) | |
Earnings Per Share [Abstract] | ||
Basic (in USD per share) | $ (0.08) | |
Diluted (in USD per share) | $ (0.08) | |
Cash flows from operating activities: | ||
Accounts receivable | $ (3,080) | |
Accrued liabilities and other liabilities | $ 7,299 |
REVENUE REVENUE (Revenue by geo
REVENUE REVENUE (Revenue by geographic location) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 251,000 | $ 188,651 |
United States | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 96,260 | 73,248 |
China | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 56,213 | 33,201 |
Europe | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 35,996 | 46,405 |
Other Americas | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 27,740 | 10,890 |
Other Asia | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 34,791 | $ 24,907 |
REVENUE REVENUE (Revenue by Pro
REVENUE REVENUE (Revenue by Product Type) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 251,000 | $ 188,651 |
ICs | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 28,587 | 42,422 |
Boards | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 118,051 | 64,292 |
Switch systems | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 55,647 | 47,146 |
Cables, accessories and other | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 48,715 | $ 34,791 |
REVENUE REVENUE (Revenue by Int
REVENUE REVENUE (Revenue by Interconnect Protocol) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 251,000 | $ 188,651 |
InfiniBand: | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 103,138 | 96,985 |
EDR | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 55,946 | 39,623 |
FDR | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 41,748 | 49,829 |
QDR/DDR/SDR | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 5,444 | 7,533 |
Ethernet | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 136,948 | 80,477 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 10,914 | $ 11,189 |
REVENUE REVENUE (Contract Liabi
REVENUE REVENUE (Contract Liabilities) (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Change in Contract with Customer, Asset and Liability [Roll Forward] | |
Balance, beginning of the period | $ 36,804 |
New performance obligations | 8,145 |
Reclassification to revenue as a result of satisfying performance obligations | (6,133) |
Balance, end of period | 38,816 |
Less: long-term portion of deferred revenue | 18,600 |
Current portion, end of the period | $ 20,216 |
BALANCE SHEET COMPONENTS (Detai
BALANCE SHEET COMPONENTS (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 |
Accounts receivable, net: | |||
Accounts receivable, gross | $ 143,529,000 | $ 154,845,000 | |
Less: allowance for doubtful accounts | (632,000) | (632,000) | |
Accounts receivable, net: | 142,897,000 | 154,213,000 | |
Inventories: | |||
Raw materials | 10,372,000 | 12,656,000 | |
Work-in-process | 31,723,000 | 22,769,000 | |
Finished goods | 27,791,000 | 29,232,000 | |
Inventories: | 69,886,000 | 64,657,000 | |
Other current assets: | |||
Prepaid expenses | 7,782,000 | 7,518,000 | |
Derivative contracts receivable | 170,000 | 982,000 | |
VAT receivable | 3,701,000 | 2,259,000 | |
Other | 3,900,000 | 3,536,000 | |
Other current assets: | 15,553,000 | 14,295,000 | |
Property and equipment, net: | |||
Property and equipment, net | 222,714,000 | 215,167,000 | |
Less: Accumulated depreciation and amortization | (112,579,000) | (105,248,000) | |
Property and equipment, net: | 110,135,000 | 109,919,000 | |
Deferred taxes and other long-term assets: | |||
Equity investments in private companies | 31,755,000 | 29,255,000 | |
Deferred taxes | 51,390,000 | 24,563,000 | |
Long-term restricted cash | 8,000,000 | 8,025,000 | $ 0 |
Other assets | 3,259,000 | 4,319,000 | |
Deferred taxes and other long-term assets: | 94,404,000 | 66,162,000 | |
Accrued liabilities: | |||
Payroll and related expenses | 62,163,000 | 71,868,000 | |
Accrued expenses | 35,117,000 | 31,951,000 | |
Derivative contracts payable | 540,000 | 17,000 | |
Product warranty liability | 765,000 | 706,000 | $ 1,049,000 |
Other | 9,076,000 | 9,516,000 | |
Accrued liabilities: | 107,661,000 | 114,058,000 | |
Other long-term liabilities: | |||
Income tax payable | 24,975,000 | 24,425,000 | |
Deferred rent | 2,505,000 | 2,220,000 | |
Other | 5,616,000 | 7,422,000 | |
Other long-term liabilities: | 33,096,000 | 34,067,000 | |
Computer, equipment, and software | |||
Property and equipment, net: | |||
Property and equipment, net | 171,640,000 | 164,707,000 | |
Furniture and fixtures | |||
Property and equipment, net: | |||
Property and equipment, net | 2,972,000 | 3,198,000 | |
Leasehold improvements | |||
Property and equipment, net: | |||
Property and equipment, net | $ 48,102,000 | $ 47,262,000 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Financial assets measured at fair value | ||
Principal due on Term Debt | $ 35,000,000 | |
Debt instrument, face amount | 280,000,000 | |
Fair value, measurements, recurring basis | ||
Financial assets measured at fair value | ||
Investments, fair value | 196,325,000 | $ 213,138,000 |
Long-term restricted cash | 8,000,000 | 8,025,000 |
Total financial assets | 204,495,000 | 222,145,000 |
Total financial liabilities | 540,000 | 17,000 |
Fair value, measurements, recurring basis | Assets | ||
Financial assets measured at fair value | ||
Total financial assets | 170,000 | 982,000 |
Fair value, measurements, recurring basis | Liabilities | ||
Financial assets measured at fair value | ||
Total financial liabilities | 540,000 | 17,000 |
Fair value, measurements, recurring basis | Money market funds | ||
Financial assets measured at fair value | ||
Investments, fair value | 599,000 | 1,857,000 |
Fair value, measurements, recurring basis | Certificates of deposit | ||
Financial assets measured at fair value | ||
Investments, fair value | 46,295,000 | 58,003,000 |
Fair value, measurements, recurring basis | U.S. Government and agency securities | ||
Financial assets measured at fair value | ||
Investments, fair value | 36,457,000 | 43,872,000 |
Fair value, measurements, recurring basis | Commercial paper | ||
Financial assets measured at fair value | ||
Investments, fair value | 25,904,000 | 27,029,000 |
Fair value, measurements, recurring basis | Corporate bonds | ||
Financial assets measured at fair value | ||
Investments, fair value | 57,417,000 | 54,447,000 |
Fair value, measurements, recurring basis | Municipal bonds | ||
Financial assets measured at fair value | ||
Investments, fair value | 14,494,000 | 15,169,000 |
Fair value, measurements, recurring basis | Foreign government bonds | ||
Financial assets measured at fair value | ||
Investments, fair value | 15,159,000 | 12,761,000 |
Fair value, measurements, recurring basis | Level 1 | ||
Financial assets measured at fair value | ||
Investments, fair value | 599,000 | 1,857,000 |
Long-term restricted cash | 0 | |
Total financial assets | 599,000 | 1,857,000 |
Total financial liabilities | 0 | 0 |
Fair value, measurements, recurring basis | Level 1 | Assets | ||
Financial assets measured at fair value | ||
Total financial assets | 0 | 0 |
Fair value, measurements, recurring basis | Level 1 | Liabilities | ||
Financial assets measured at fair value | ||
Total financial liabilities | 0 | 0 |
Fair value, measurements, recurring basis | Level 1 | Money market funds | ||
Financial assets measured at fair value | ||
Investments, fair value | 599,000 | 1,857,000 |
Fair value, measurements, recurring basis | Level 1 | Certificates of deposit | ||
Financial assets measured at fair value | ||
Investments, fair value | 0 | 0 |
Fair value, measurements, recurring basis | Level 1 | U.S. Government and agency securities | ||
Financial assets measured at fair value | ||
Investments, fair value | 0 | 0 |
Fair value, measurements, recurring basis | Level 1 | Commercial paper | ||
Financial assets measured at fair value | ||
Investments, fair value | 0 | 0 |
Fair value, measurements, recurring basis | Level 1 | Corporate bonds | ||
Financial assets measured at fair value | ||
Investments, fair value | 0 | 0 |
Fair value, measurements, recurring basis | Level 1 | Municipal bonds | ||
Financial assets measured at fair value | ||
Investments, fair value | 0 | 0 |
Fair value, measurements, recurring basis | Level 1 | Foreign government bonds | ||
Financial assets measured at fair value | ||
Investments, fair value | 0 | 0 |
Fair value, measurements, recurring basis | Level 2 | ||
Financial assets measured at fair value | ||
Investments, fair value | 195,726,000 | 211,281,000 |
Long-term restricted cash | 8,000,000 | 8,025,000 |
Total financial assets | 203,896,000 | 220,288,000 |
Total financial liabilities | 540,000 | 17,000 |
Fair value, measurements, recurring basis | Level 2 | Assets | ||
Financial assets measured at fair value | ||
Total financial assets | 170,000 | 982,000 |
Fair value, measurements, recurring basis | Level 2 | Liabilities | ||
Financial assets measured at fair value | ||
Total financial liabilities | 540,000 | 17,000 |
Fair value, measurements, recurring basis | Level 2 | Money market funds | ||
Financial assets measured at fair value | ||
Investments, fair value | 0 | 0 |
Fair value, measurements, recurring basis | Level 2 | Certificates of deposit | ||
Financial assets measured at fair value | ||
Investments, fair value | 46,295,000 | 58,003,000 |
Fair value, measurements, recurring basis | Level 2 | U.S. Government and agency securities | ||
Financial assets measured at fair value | ||
Investments, fair value | 36,457,000 | 43,872,000 |
Fair value, measurements, recurring basis | Level 2 | Commercial paper | ||
Financial assets measured at fair value | ||
Investments, fair value | 25,904,000 | 27,029,000 |
Fair value, measurements, recurring basis | Level 2 | Corporate bonds | ||
Financial assets measured at fair value | ||
Investments, fair value | 57,417,000 | 54,447,000 |
Fair value, measurements, recurring basis | Level 2 | Municipal bonds | ||
Financial assets measured at fair value | ||
Investments, fair value | 14,494,000 | 15,169,000 |
Fair value, measurements, recurring basis | Level 2 | Foreign government bonds | ||
Financial assets measured at fair value | ||
Investments, fair value | $ 15,159,000 | $ 12,761,000 |
INVESTMENTS (Schedule of cash,
INVESTMENTS (Schedule of cash, cash equivalents and short-term investments) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Amortized Cost | |||
Amortized Cost | $ 287,207 | $ 274,364 | |
Short-term investments | 196,629 | 211,891 | |
Unrealized Gains | 0 | 1 | |
Unrealized Losses | (903) | (611) | |
Estimated Fair Value | |||
Short term investments, fair value | (286,304) | (273,754) | |
Short-term investments | 195,726 | 211,281 | |
Realized gains (losses) on the sale of marketable securities | 1,000 | $ 900 | |
Cash | |||
Amortized Cost | |||
Amortized Cost | 89,979 | 60,616 | |
Unrealized Gains | 0 | 0 | |
Unrealized Losses | 0 | 0 | |
Estimated Fair Value | |||
Short term investments, fair value | (89,979) | (60,616) | |
Money market funds | |||
Amortized Cost | |||
Amortized Cost | 599 | 1,857 | |
Unrealized Gains | 0 | 0 | |
Unrealized Losses | 0 | 0 | |
Estimated Fair Value | |||
Short term investments, fair value | (599) | (1,857) | |
Certificates of deposit | |||
Amortized Cost | |||
Amortized Cost | 46,361 | 58,039 | |
Unrealized Gains | 0 | 0 | |
Unrealized Losses | (66) | (36) | |
Estimated Fair Value | |||
Short term investments, fair value | (46,295) | (58,003) | |
U.S. Government and agency securities | |||
Amortized Cost | |||
Amortized Cost | 36,644 | 44,070 | |
Unrealized Gains | 0 | 0 | |
Unrealized Losses | (187) | (198) | |
Estimated Fair Value | |||
Short term investments, fair value | (36,457) | (43,872) | |
Commercial paper | |||
Amortized Cost | |||
Amortized Cost | 25,992 | 27,073 | |
Unrealized Gains | 0 | 1 | |
Unrealized Losses | (87) | (45) | |
Estimated Fair Value | |||
Short term investments, fair value | (25,905) | (27,029) | |
Corporate bonds | |||
Amortized Cost | |||
Amortized Cost | 57,861 | 54,673 | |
Unrealized Gains | 0 | 0 | |
Unrealized Losses | (445) | (226) | |
Estimated Fair Value | |||
Short term investments, fair value | (57,416) | (54,447) | |
Municipal bonds | |||
Amortized Cost | |||
Amortized Cost | 14,551 | 15,227 | |
Unrealized Gains | 0 | 0 | |
Unrealized Losses | (57) | (58) | |
Estimated Fair Value | |||
Short term investments, fair value | (14,494) | (15,169) | |
Foreign government bonds | |||
Amortized Cost | |||
Amortized Cost | 15,220 | 12,809 | |
Unrealized Gains | 0 | 0 | |
Unrealized Losses | (61) | (48) | |
Estimated Fair Value | |||
Short term investments, fair value | (15,159) | (12,761) | |
Cash and Cash Equivalents [Member] | |||
Amortized Cost | |||
Amortized Cost | 90,578 | 62,473 | |
Estimated Fair Value | |||
Short term investments, fair value | $ (90,578) | $ (62,473) |
INVESTMENTS (Fair value due by
INVESTMENTS (Fair value due by period) (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Amortized Cost | ||
Due in less than one year | $ 171,097 | $ 148,232 |
Due in one to three years | 25,532 | 63,659 |
Available-for-sale securities, amortized cost basis | 196,629 | 211,891 |
Estimated Fair Value | ||
Due in less than one year | 170,488 | 147,921 |
Due in one to three years | 25,238 | 63,360 |
Estimated Fair Value | 195,726 | 211,281 |
Investment in a privately-held companies accounted for under the cost method | $ 31,800 | $ 29,300 |
GOODWILL AND INTANGIBLE ASSET51
GOODWILL AND INTANGIBLE ASSETS (Narrative) (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Goodwill, Period Increase (Decrease) | $ 0 | ||
Goodwill | 472,437,000 | $ 472,437,000 | |
Amortization of intangible assets | $ 16,300,000 | $ 15,000,000 |
GOODWILL AND INTANGIBLE ASSET52
GOODWILL AND INTANGIBLE ASSETS (Schedule of carrying amounts of intangible assets) (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | $ 402,190 | $ 395,326 |
Accumulated Amortization | (183,452) | (167,131) |
Net Carrying Value | 218,738 | 228,195 |
Licensed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | 47,271 | 40,407 |
Accumulated Amortization | (19,686) | (16,478) |
Net Carrying Value | 27,585 | 23,929 |
Developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | 279,543 | 279,543 |
Accumulated Amortization | (133,297) | (122,414) |
Net Carrying Value | 146,246 | 157,129 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | 69,776 | 69,776 |
Accumulated Amortization | (26,546) | (24,783) |
Net Carrying Value | 43,230 | 44,993 |
Trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | 5,600 | 5,600 |
Accumulated Amortization | (3,923) | (3,456) |
Net Carrying Value | $ 1,677 | $ 2,144 |
GOODWILL AND INTANGIBLE ASSET53
GOODWILL AND INTANGIBLE ASSETS (Schedule of estimated future amortization expense from amortizable intangible assets) (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract] | ||
2018 (remaining nine months) | $ 51,849 | |
2,019 | 60,253 | |
2,020 | 49,693 | |
2,021 | 31,630 | |
2,022 | 11,059 | |
Thereafter | 14,254 | |
Net Carrying Value | $ 218,738 | $ 228,195 |
DERIVATIVES AND HEDGING ACTIV54
DERIVATIVES AND HEDGING ACTIVITIES (Fair Value of Derivative Contracts and Notional Amounts) (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Derivatives designated as hedging instruments | ||
Notional Disclosures [Abstract] | ||
Currency forward and option contracts | $ 64,485 | $ 52,380 |
Derivatives not designated as hedging instruments | ||
Notional Disclosures [Abstract] | ||
Currency forward and option contracts | 39,841 | 47,015 |
Currency forward and option contracts | Other current assets | ||
Derivative, Fair Value, Net [Abstract] | ||
Currency forward contracts, assets | 170 | 982 |
Currency forward and option contracts | Other current assets | Derivatives designated as hedging instruments | ||
Derivative, Fair Value, Net [Abstract] | ||
Currency forward contracts, assets | 170 | 980 |
Currency forward and option contracts | Other current assets | Derivatives not designated as hedging instruments | ||
Derivative, Fair Value, Net [Abstract] | ||
Currency forward contracts, assets | 0 | 2 |
Currency forward and option contracts | Accrued liabilities | ||
Derivative, Fair Value, Net [Abstract] | ||
Currency forward contracts, liabilities | 540 | 17 |
Currency forward and option contracts | Accrued liabilities | Derivatives designated as hedging instruments | ||
Derivative, Fair Value, Net [Abstract] | ||
Currency forward contracts, liabilities | 528 | 0 |
Currency forward and option contracts | Accrued liabilities | Derivatives not designated as hedging instruments | ||
Derivative, Fair Value, Net [Abstract] | ||
Currency forward contracts, liabilities | $ 12 | $ 17 |
DERIVATIVES AND HEDGING ACTIV55
DERIVATIVES AND HEDGING ACTIVITIES (Effect of Derivatives Designated as Hedging Instruments on AOCI) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Balance of designated derivative contracts as cash flow hedges and their impact on OCI | ||
Balance at the beginning of the period | $ 1,618 | |
Amount of loss recognized in OCI (effective portion) | (1,338) | $ 4,244 |
Balance at the end of the period | (13) | |
Derivatives designated as hedging instruments | ||
Balance of designated derivative contracts as cash flow hedges and their impact on OCI | ||
Balance at the beginning of the period | 925 | |
Amount of loss recognized in OCI (effective portion) | (803) | |
Amount of gain reclassified from OCI to income (effective portion) | (535) | |
Balance at the end of the period | $ (413) |
DERIVATIVES AND HEDGING ACTIV56
DERIVATIVES AND HEDGING ACTIVITIES (Effective of Contracts on Statement of Operations) (Details) - Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Derivatives designated as hedging instruments | Operating income | ||
Summary of Derivative Instruments Impact on Results of Operations [Abstract] | ||
Gain (loss) on derivatives | $ 535 | $ 1,436 |
Derivatives designated as hedging instruments | Other income (loss) | ||
Summary of Derivative Instruments Impact on Results of Operations [Abstract] | ||
Gain (loss) on derivatives | 0 | 0 |
Derivatives not designated as hedging instruments | Operating income | ||
Summary of Derivative Instruments Impact on Results of Operations [Abstract] | ||
Gain (loss) on derivatives | 0 | 0 |
Derivatives not designated as hedging instruments | Other income (loss) | ||
Summary of Derivative Instruments Impact on Results of Operations [Abstract] | ||
Gain (loss) on derivatives | $ (890) | $ 2,066 |
COMMITMENTS AND CONTINGENCIES57
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Future minimum payments under non-cancelable operating leases | ||
2018 (remaining nine months) | $ 16,328 | |
2,019 | 17,514 | |
2,020 | 14,683 | |
2,021 | 12,880 | |
2,022 | 9,756 | |
Thereafter | 60,021 | |
Total minimum lease payments | 131,182 | |
Purchase commitments | ||
2018 (remaining nine months) | 212,618 | |
2,019 | 11,918 | |
2,020 | 2,005 | |
2,021 | 536 | |
2,022 | 536 | |
Thereafter | 0 | |
Amount of non-cancelable purchase commitments | 227,613 | |
Loss Contingencies [Line Items] | ||
Total minimum lease payments | $ 131,182 | |
Royalties payable, percentage | 4.50% | |
Accrued royalties | $ 36,400 | |
Unrecognized tax benefits | 46,000 | $ 45,200 |
Unrecognized tax benefits that would impact effective tax rate | 23,400 | |
Yokneam | ||
Future minimum payments under non-cancelable operating leases | ||
Total minimum lease payments | $ 3,000 | |
Loss Contingencies [Line Items] | ||
Length of operating lease term (in years) | 10 years | |
Present value of capital lease obligations | $ 30,300 | |
Total minimum lease payments | $ 3,000 |
SHARE INCENTIVE PLANS (Stock Op
SHARE INCENTIVE PLANS (Stock Option Plans) (Details) - shares | Feb. 14, 2017 | Mar. 31, 2018 |
Share incentive plans | ||
Common stock, capital shares reserved for future issuance | 8,035,481 | |
Second Restated Plan | ||
Share incentive plans | ||
Number of additional shares authorized | 1,640,000 | |
Common stock, capital shares reserved for future issuance | 2,390,000 |
SHARE INCENTIVE PLANS (Summary
SHARE INCENTIVE PLANS (Summary of share option awards activity under equity incentive plans) (Details) - Employee Stock Option - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Number of Shares | |||
Options outstanding at the beginning of the period (in shares) | 1,110,061 | ||
Options exercised (in shares) | (113,101) | ||
Options canceled (in shares) | (1,560) | ||
Options outstanding at the end of the period (in shares) | 995,400 | ||
Weighted Average Exercise Price | |||
Options outstanding at the beginning of the period (in USD per share) | $ 38.35 | ||
Options exercised (in USD per share) | 23.96 | ||
Options canceled (in USD per share) | 90.96 | ||
Options outstanding at the end of the period (in USD per share) | $ 39.91 | ||
Pretax intrinsic value of options exercised | $ 5 | $ 3.6 | |
Share price (in USD per share) | $ 72.85 | ||
Pretax intrinsic value of options outstanding | $ 37.5 | $ 35.5 | |
Options, exercisable, number | 993,393 | 1,107,712 | |
Pretax intrinsic value of exercisable options | $ 37.4 | $ 35.4 |
SHARE INCENTIVE PLANS (Summar60
SHARE INCENTIVE PLANS (Summary of restricted share units activity) (Details) - Restricted Share Units Outstanding - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Number of Shares | |||
Non vested restricted share units outstanding at the beginning of the period (in shares) | 3,414,705 | ||
Restricted share units granted (in shares) | 87,200 | ||
Restricted share units vested (in shares) | (271,422) | ||
Restricted share units canceled (in shares) | (255,488) | ||
Non vested restricted share units at the end of the period (in shares) | 2,974,995 | ||
Weighted Average Grant Date Fair Value | |||
Non vested restricted share units at the beginning of the period (in USD per share) | $ 48.45 | ||
Restricted share units granted (in USD per share) | 65.62 | $ 44.83 | |
Restricted share units vested (in USD per share) | 45.44 | ||
Restricted share units cancelled (in USD per share) | 48.86 | ||
Non vested restricted share units at the end of the period (in USD per share) | $ 49.19 | ||
Total intrinsic value of all outstanding restricted share units | $ 216.7 | $ 220.9 |
SHARE INCENTIVE PLANS (Employee
SHARE INCENTIVE PLANS (Employee Stock Purchase Plan activity) (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Stock issued during period, shares, employee stock ownership plan | 288,017 | 269,698 |
Employee Stock Ownership Plan (ESOP), weighted average purchase price of shares purchased (in USD per share) | $ 39.40 | $ 37.63 |
SHARE INCENTIVE PLANS (Shares r
SHARE INCENTIVE PLANS (Shares reserved, ESPP assumptions) (Details) - shares | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Ordinary shares reserved for future issuance under equity incentive plans | |||
Share options outstanding | 995,400 | ||
Shares authorized for future issuance | 927,634 | ||
Common stock, capital shares reserved for future issuance | 8,035,481 | ||
Restricted Share Units Outstanding | |||
Ordinary shares reserved for future issuance under equity incentive plans | |||
Restricted share units outstanding | 2,974,995 | 3,414,705 | |
Employee stock | |||
Ordinary shares reserved for future issuance under equity incentive plans | |||
Shares authorized for future issuance | 3,137,452 | ||
Weighted average assumptions | |||
Dividend yield | 0.00% | 0.00% | |
Expected volatility | 37.20% | 25.30% | |
Risk free interest rate | 1.20% | 0.91% | |
Expected life, years | 6 months | 6 months |
SHARE INCENTIVE PLANS (Share-ba
SHARE INCENTIVE PLANS (Share-based compensation expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Share-based compensation expense | ||
Allocated share-based compensation expense | $ 14,974 | $ 14,768 |
Total unrecognized share-based compensation costs related to non-vested awards | $ 123,900 | |
Weighted average period for recognition of unrecognized share-based compensation costs (in years) | 2 years 6 months 18 days | |
Cost of goods sold | ||
Share-based compensation expense | ||
Allocated share-based compensation expense | $ 411 | 482 |
Research and development | ||
Share-based compensation expense | ||
Allocated share-based compensation expense | 8,174 | 8,690 |
Sales and marketing | ||
Share-based compensation expense | ||
Allocated share-based compensation expense | 3,599 | 3,338 |
General and administrative | ||
Share-based compensation expense | ||
Allocated share-based compensation expense | $ 2,790 | $ 2,258 |
ACCUMULATED OTHER COMPREHENSI64
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Summary of the changes in accumulated balances of other comprehensive income (loss)) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | $ 1,057,448 | |
Other comprehensive income/(loss) before reclassifications, net of taxes | (1,096) | $ 5,753 |
Realized (gains)/losses reclassified from accumulated other comprehensive income | (535) | (1,440) |
Other comprehensive income (loss), net of tax | (1,631) | 4,313 |
Ending balance | 1,127,193 | |
Unrealized Gains (Losses) on Available-for-Sale Securities | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | 693 | (236) |
Other comprehensive income/(loss) before reclassifications, net of taxes | (293) | 73 |
Realized (gains)/losses reclassified from accumulated other comprehensive income | 0 | (4) |
Other comprehensive income (loss), net of tax | (293) | 69 |
Ending balance | 400 | (167) |
Unrealized Gains (Losses) on Derivatives Designated as Hedging Instruments | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | 925 | (692) |
Other comprehensive income/(loss) before reclassifications, net of taxes | (803) | 5,680 |
Realized (gains)/losses reclassified from accumulated other comprehensive income | (535) | (1,436) |
Other comprehensive income (loss), net of tax | (1,338) | 4,244 |
Ending balance | (413) | 3,552 |
Total | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | 1,618 | (928) |
Ending balance | $ (13) | $ 3,385 |
ACCUMULATED OTHER COMPREHENSI65
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Reclassification out of accumulated other comprehensive income) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Reclassifications out of accumulated other comprehensive income | ||
Cost of revenues | $ (88,998) | $ (64,450) |
General and administrative | (16,516) | (12,519) |
Sales and marketing | (39,494) | (35,757) |
Research and development | (86,426) | (88,491) |
Other income, net | 638 | 683 |
Total reclassifications for the period | (535) | (1,440) |
Realized (Gains)/Losses Reclassified from Accumulated Other Comprehensive Income (Loss) | Realized (gains)/losses on derivatives designated as hedging instruments | ||
Reclassifications out of accumulated other comprehensive income | ||
Cost of revenues and Operating expenses: | (535) | (1,436) |
Cost of revenues | (26) | (84) |
General and administrative | (64) | (115) |
Sales and marketing | (47) | (145) |
Research and development | (398) | (1,092) |
Other income, net | $ 0 | $ (4) |
INCOME TAXES (Details)
INCOME TAXES (Details) | Jun. 14, 2017 | Mar. 31, 2018USD ($)subsidiary$ / shares | Mar. 31, 2017 | Dec. 31, 2017USD ($) |
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Unrecognized tax benefits | $ 46,000,000 | $ 45,200,000 | ||
Unrecognized tax benefits, income tax penalties and interest accrued | 1,800,000 | 1,600,000 | ||
Valuation allowance against deferred tax assets | (26,700,000) | |||
Provisional decrease to deferred tax assets | $ 0 | $ 3,200,000 | ||
Effective income tax rate, percent | (230.60%) | 11.80% | ||
Effective income tax rate, at federal statutory income tax rate, percent | 21.00% | |||
Domestic Tax Authority | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Operating loss carryforwards | $ 86,100,000 | |||
State and Local Jurisdiction | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Operating loss carryforwards | $ 74,400,000 | |||
Israel Tax Authority | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Income tax holiday, income tax benefits (in usd per share) | $ / shares | $ 0.09 | |||
Yokneam | Israel Tax Authority | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Effective income tax rate, percent | 7.50% | |||
Tel Aviv | Israel Tax Authority | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Effective income tax rate, percent | 12.00% | |||
Research Tax Credit Carryforward | Domestic Tax Authority | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Tax credit carryforward, amount | $ 12,900,000 | |||
Research Tax Credit Carryforward | State and Local Jurisdiction | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Tax credit carryforward, amount | 4,500,000 | |||
Israel Tax Authority | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Income tax holiday, aggregate dollar amount | $ 4,700,000 | |||
Israel Tax Authority | Israel Tax Authority | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Number of subsidiaries | subsidiary | 1 | |||
Israel Tax Authority | Tel Aviv | ||||
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract] | ||||
Income tax holiday reduced income tax rate after second year of tax holiday | 10.00% |
OTHER INCOME, NET (Details)
OTHER INCOME, NET (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Other Nonoperating Income (Expense) [Abstract] | ||
Interest income and gains on short-term investments, net | $ 967 | $ 878 |
Foreign exchange loss, net | (182) | (162) |
Other | (147) | (33) |
Other income, net | $ 638 | $ 683 |
TERM DEBT (Details)
TERM DEBT (Details) - USD ($) | Feb. 22, 2016 | Mar. 31, 2018 | Mar. 31, 2017 |
Debt Instrument [Line Items] | |||
Debt instrument, face amount | $ 280,000,000 | ||
Debt issuance costs | $ 5,500,000 | ||
Term Debt, principal amount | 35,000,000 | ||
Less unamortized debt issuance costs | 668,000 | ||
Term Debt, principal net of unamortized debt issuance costs | $ 34,332,000 | ||
Effective interest rate | 3.84% | ||
Repayments of secured debt | $ 39,000,000 | $ 20,000,000 | |
2018 (remainder of year) | 0 | ||
2,019 | 35,000,000 | ||
Debt, long-term and short-term, combined amount | $ 35,000,000 | ||
Eurodollar | |||
Debt Instrument [Line Items] | |||
Interest rate, stated percentage | 1.00% | ||
Base Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 0.50% | ||
Minimum | Eurodollar | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 1.25% | ||
Minimum | Base Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 0.25% | ||
Maximum | Eurodollar | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 2.00% | ||
Maximum | Base Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 1.00% |
RESTRUCTURING CHARGES (Details)
RESTRUCTURING CHARGES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | $ 7,587 | $ 0 |
Employee separation and severance costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 3,400 | |
Contract termination | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 3,200 | |
Restructuring cost, expected remaining cost | 500 | |
Disposal of assets | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 1,000 | |
Restructuring cost, expected remaining cost | 500 | |
Facility closing costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring cost, expected remaining cost | $ 500 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ in Millions | 1 Months Ended | |
Apr. 30, 2018 | Mar. 31, 2018 | |
Subsequent Event [Line Items] | ||
Accrued royalties | $ 36.4 | |
Subsequent event | ||
Subsequent Event [Line Items] | ||
Payments for Royalties | $ 9.3 |